Shopee spending puts Sea in rough waters

In case you missed it, Sea is navigating some choppy waters.

After the New York Stock Exchange-listed firm reported its Q2 earnings on August 15, its shares plunged by 29%, the firm’s biggest daily drop since going public in 2017.

The cause: Its earnings missed analysts’ revenue estimates.

Another big concern for analysts seems to be the performance of Sea’s ecommerce unit, Shopee, amid stiffening competition in Southeast Asia.

As the chart above shows, Shopee’s sales and marketing expenses have increased and its adjusted EBITDA has fallen, not exactly a recipe for financial health.

The ecommerce unit spent US$432 million on sales and marketing in Q2, up from US$338 million in the first quarter of this year. Meanwhile, adjusted EBITDA fell to US$150 million from US$208 million.

The rapid growth of TikTok Shop in the region could be behind the increased marketing spend, as Shopee looks to fend off a competitor that is on the minds of both management and analysts.

For more details on why Sea’s shares plunged but those of rivals like GoTo didn’t, check out the full story here.