Why Sea Limited fell 19.1% in June

What happened

Shares of Sea Limited (SE 3.29%) fell 19.1% in June, according to data provided by S&P Global Market Intelligence.

The latest drop means that shares of the e-commerce and gaming company have fallen 70.1% year-to-date.

Image source: Getty Images.

So what

Shares of Sea had fallen alongside the continued decline in the Nasdaq Compound and S&P500 index. Year-to-date, the Nasdaq has fallen nearly 30% while the S&P 500 barometer has fallen 20.2%, placing both indices firmly in a bear market. It didn’t help that Sea Limited also released a bearish set of results for its first quarter of 2022.

Its digital entertainment division, led by Garena, witnessed the continued decline in user numbers quarter over quarter for a second consecutive quarter. Quarterly paid users fell 20.4% quarter-over-quarter to 61.4 million and were down 23% year-over-year to 79.8 million. Quarterly active and paying users peaked in the third quarter of 2021 and have been trending downward ever since.

The company’s e-commerce segment, Shopee, also saw gross orders and gross merchandise value (GMV) fall quarter-over-quarter after seeing continued quarterly growth. Gross orders increased from 2 billion to 1.9 billion in Q1 2022 while GMV increased from $18.2 billion in Q4 2022 to $17.4 billion in Q1 2022. Gross orders and GMV were however still up 71% and 39% YoY. year, respectively.

To make matters worse, Shopee announced that it would be laying off some employees from its food delivery and online payment teams in Southeast Asia. In addition, the e-commerce division is also reducing its workforce in Mexico, Argentina, Chile and Spain. Shopee is also closing its pilot project in Spain after pulling out of France and India over the past year, leading investors to believe the company may have grown too quickly. The layoffs have also heightened concerns about an impending economic downturn and the need for the company to resize its workforce to cope.

Now what

Investors will be watching Sea Limited’s upcoming quarterly results closely to see if the downward trend continues for Garena and Shopee. Although the company has considerable influence in the Southeast Asian region due to its rapid expansion over the past two years, it now faces the prospect of a major slowdown in many markets in which she operates. It may take some time before the company can return to growth, and investors should also adjust their expectations accordingly.