Sea’s Secret Billionaire CEO Opens Up After 75% Stock Market Crash

(Bloomberg) – Last Monday, employees of Sea Ltd. were starting their week when an email from CEO Forrest Li arrived. In the 900-word memo, the billionaire struck a contrite tone, addressing head-on a $150 billion drop in the value of his business since the end of 2021.

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“This decline is painful and you may feel frustrated, discouraged or worried about the future of Sea,” the 44-year-old wrote in his email seen by Bloomberg News, sent to the whole of the world. business on the first business day after Sea landed its third – largest stock drop. “Don’t worry: we are in a strong position internally, and we are clear on our next steps. It’s a short-term pain that we have to endure to truly maximize our long-term potential.

Li’s missive was unusual and underlines the changes underway at the gaming and e-commerce giant. In recent years, as the company grew rapidly, the founder addressed his troops primarily to celebrate key milestones. But after a series of extraordinary setbacks this year – including India’s abrupt ban on its most popular mobile game – the company is showing signs of complying with shareholder and employee demands for more openness.

Global investors who saw a 2,300% rise from 2017 to 2021 have long been content to let Sea go about its business. That started to change in November, when a disappointing quarterly report prompted profit taking. The sell-off accelerated in January when top backer Tencent Holdings Ltd. announced it was selling part of its stake, then accelerated with India’s ban in February before culminating in abysmal quarterly results this month. In total, Sea lost three quarters of its value in five months.

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Fund managers have in recent months begun urging Sea to be more transparent about its strategy and numbers, according to people familiar with the matter. During an earnings call last week, Li made unusually long and detailed remarks. He rarely talks about his ambitions in public forums, deferring communications to group chief executive Yanjun Wang, a low-key lawyer.

During the call, Sea provided more specific new data, including its first annual guidance for the financial services arm SeaMoney and the unit economics for the online shopping arm Shopee in Brazil, as well as for Asia. Southeast and Taiwan.

“If not for the decline in share prices, Sea might not have disclosed so many metrics,” said Kelvin Seetoh, shareholder and co-founder of Singaporean investor group 10X Capital. “They could do this to give investors a better understanding of their business and it’s not too late.”

Sea said the additional disclosures reflect the growth and evolution of the business. “As our business continues to grow and evolve around the world, we continue to share insightful information about these changes and our performance, consistent with our long-standing commitment to our investors,” the company said in a statement to Bloomberg News.

Employees also ask for more information. In early March, Singapore-based consulting startup Momentum Academy hosted a webinar titled “Off the Record – Behind Shopee’s Doors” to discuss the inner workings of the Sea unit. Among the more than 400 people in attendance were Shopee employees, eager to hear from the researchers unrelated to the company.

The pressure has sparked an internal debate within some teams over how much the company should share publicly, said the people, who asked not to be named because the matter is private.

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Sea’s initial tendency to share as little as possible stands out in industries where publicity is often sought after. Unlike most game companies, its Garena unit almost never discloses upcoming titles. Senior executives began talking about Sea’s ambition to become a global internet company just two years after Shopee began operating in Brazil. A French company was created without notice, then closed abruptly.

Investors have resorted to creative ways to navigate the culture of secrecy nurtured by Sea’s highest echelons, including billionaires Li and co-founder Gang Ye. The two own about a fifth of the company, while Li has majority voting control. The company’s six-member board includes an executive from Tencent and billionaire tycoon Robert Kuok’s Kerry Group. Both companies are notoriously low-key and are among Sea’s earliest investors.

Tencent sells $3 billion worth of Singapore’s Sea shares

In Sea’s early days as a publicly traded company, US hedge funds hired local teams in Indonesia to collect data to test whether Shopee was gaining traction, according to people familiar with the matter. Companies have increased their bets on Sea as Shopee has become a major e-commerce player in Southeast Asia and Taiwan. Soon, value investors, pension funds and sovereign wealth funds piled in.

“Many emerging-markets fund managers had an excessive focus on off-benchmark Sea,” said Gaurav Patankar, head of emerging-markets equity strategy at Bloomberg Intelligence in New York. “The people keeping the bags are good old-fashioned long-term investors, so the panic is setting in.”

Fred Liu, founder of New York-based hedge fund Hayden Capital, is among Sea investors who regularly travel to Southeast Asia for information. Passionate traders in Singapore are watching Li and Ye closely. They show up when leaders show up at public events, hoping to ask burning questions, gain new business clues or even just read their body language, one of the people said.

“You have to come before investors when times are tough,” said Liu, a Sea investor since 2018. “You can’t hide in a corner and say nothing. Investors will kill you for it. You have to communicate and be more open.

Some are even trying to track down three business jets Sea allegedly bought for its top brass to determine which country the company plans to expand into next. The trio that leads Sea’s global business is Li, Ye and Chris Feng, who is widely recognized for the success of Shopee and was recently promoted to Sea Group Chairman.

After the app was banned in India, Ye, who is in charge of government relations, visited the country and met with Union Home Minister Ajay Bhalla, according to a person familiar with the case. The government is unlikely to reverse its ban on Sea’s Free Fire gambling, although it likely won’t block Shopee, another person with knowledge of the matter said. A government spokesman did not respond to a text message seeking comment.

On March 1, Li and Ye traveled to Jakarta to welcome Indonesian President Joko Widodo to an event at sea, part of a campaign to expand operations in Southeast Asia’s largest economy. Is. The live-streamed event showed a rare public appearance by the two low-key executives.

In his email to staff, Li defended management’s decision to continue spending for growth over the next few years, rather than chasing profitability to appease shareholders. The stock fell for a fifth consecutive session on the day, dragging down around 40% for the week.

“Some investors may prefer a different approach, but we are the ones taking a longer-term view,” Li wrote. huge growth opportunities in our future.”

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