Sea to offer $1b in convertible notes to drive expansion

Southeast Asian internet giant Sea announced it’s proposing to offer US$1 billion of unsecured convertible senior notes due 2024, intending to give the initial purchaser a 13-day option to buy an additional US$150 million worth of notes.

Photo credit: Sea Group

In connection with the pricing of the notes, the company expects to enter into capped call transactions – one or more call options that limit the maximum possible profit for its holder – with the initial purchaser and/or one or more other financial institutions.

The transactions are generally expected to reduce potential dilution with respect to its American depositary shares and class A ordinary shares upon conversion of the notes, according to a press release.

The company plans to use part of the funds to pay the cost of the capped call transactions. If the initial purchaser exercises its option to buy additional notes, Sea expects to use a portion of the funds to enter into more capped call transactions.

In addition, it intends to use the rest of the proceeds from the convertible notes for business expansion and other general corporate purposes, such as potential strategic investments and acquisitions.

The notes are due to mature on December 1, 2024, unless redeemed, repurchased, or converted prior to the maturity date.

Sea Group recently reported its earnings results for the third quarter, posting a net loss of US$206 million for the three months that ended September 30. It fared a little bit better compared to the US$218 million loss it recorded in the same quarter last year.

Much like the previous quarters, the Q3 performance of the Tencent-backed company was weighed down by its ecommerce bet Shopee, but was slightly offset by gains in its digital entertainment business, which houses its gaming and esports division.