From Free Fire to free fall: Can Sea arrest share price decline?

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Hello reader,

A whirlwind, a hurricane, or an earthquake? Whatever it was, a Free Fire-ban-sized calamity sent Sea Group’s (SE, NYSE) share price on an almighty plunge, with the tech behemoth enduring its biggest one-day fall last week. Its shares are currently trading a little over 60% below its 52-week high of US$372.70.

The Singapore-based firm shed US$16 billion in market value – a roughly 18% drop – after India banned Free Fire, the best-selling game of Sea’s digital entertainment unit Garena. The Indian government considers the title a threat to national security. This led to a spate of downgrades or price target cuts by analysts and Sea’s shares ended the week down around 20%.

The ban on Free Fire has certainly shaken Sea’s investors, with fears growing over whether the ban could be extended to include another of its pillars in Shopee.

In our premium story analyzing Shopee’s odds in India, my colleague Samreen notes that the ecommerce platform has made a strong start in the country but faces strong competition from the likes of Amazon, Flipkart, Meesho, and Snapdeal.

Image credit: Timmy Loen

A bright spot ‌in the life of Forrest Li, Sea’s chairman and CEO, went largely unnoticed amid the chaos of his company’s share price. Shareholders approved changes last week that further entrenched Li’s control over Sea, giving him 57% of total voting power.

However, Sea has no time to relax – this premium story breaks down Garena’s slowing growth, Shopee’s revitalized competitors in its Southeast Asian markets, and the dangers of expanding at breakneck speeds.

Many questions remain up in the air. Will Sea sail through the Garena slowdown? How much will India’s ban on Free Fire impact Sea’s top and bottom lines? Perhaps investors will be treated to a few definite answers when Sea releases its Q4 2021 earnings report on March 1.

— Shravanth

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Image credit: Timmy Loen