Shares of Sea Limited Skyrocket Over 40% after Q3 Financial Report

UTC by Ibukun Ogundare · 3 min read
Shares of Sea Limited Skyrocket Over 40% after Q3 Financial Report
Photo: Depositphotos

The internet company has faced several challenges this year. One of them was the ban introduced on its prominent Free Fire game in India in early 2022.

Shares of Sea Limited (NYSE: SE) skyrocketed despite announcing poor Q3 financial reports. The gains were in response to the company’s announcement to shift its focus from growth increase to profitability. Sea Limed shares’ value increased by 41% after the announcement. Before the announcement, the company’s share was trading at $45.80 but increased to $62.70 after the Q3 earnings reports.

Speaking on the Q3 financial performance, the Chairman and CEO of Sea Limited, Forrest Li, said:

“Given the significant uncertainties in the macro environment, we have entirely shifted our mindset and focus from growth to achieving self-sufficiency and profitability as soon as possible, without relying on any external funding,”

The company’s shares have plummeted by more than 70% year-to-date. Notably, the company has two revenue-generating outlets. They are Shopee, an online shopping platform, and Garena, a gaming hub. Also, the company has been wallowing in financial deep. In the 2022 Q3 reports, Sea Limited’s loss increased from $166 million in Q3 2021 to $358 million. The financial reports were based on EBITDA, a measure of profitability that shows total earnings before interest, taxes, depreciation, and amortization.

Due to the enormous loss, Sea Limited has terminated the appointment of over 7,000 employees in the past six months. Besides this, Sea Limited’s executives have announced a halt in salaries payment until the company can cater for its expenses. In Q3 2022, Sea Limited recorded higher EBITDA YoY in its e-commerce and financial unit. The loss for Shopee narrowed to $495.7 million, improving by 27.5% year-on-year. Shopee Pay’s loss also reduced to $67.7 million, reducing by 57.4% compared to 2021. The company plans to break even on Shopee by the end of 2023.

Sea Limited Q3 Reports: New Strategy Focuses on Profit-making

The internet company has faced several challenges this year. One of the challenges faced by Sea Limited is the ban on its prominent Free Fire game in India in early 2022. Speaking on this, Li said, “Garena plans to launch new games,” due to uncertainties, the company has reduced Garena’s expenses in 2022 to a range of $2.6 billion and $2.8 billion. Sea Limited planned to spend a range of $2.9 billion to $3.1 billion on Garena in 2022. Other challenges encountered by the company include the reduction of investment by Tencent Holdings and the close of Shopee in Latin America.

The Singapore-based company is yet to give any guidelines on its plan for 2023, perhaps due to the ongoing uncertainties. In recent times, Sea Limited has reduced its expansion rate. In March, the company halted operations in India and France to focus on Brazil, Southeast Asia, and Taiwan. Sea Limited’s CEO, he stated that “Brazil continues to be a growth market and we will continue to invest in the market,”

Considering the losing streak, the company has discovered its flare for growth was not a profitable approach. Therefore, its new strategy must scale down growth and focus on profit-making. According to Sea Limited’s adjusted EBITDA, the loss for 2020 and 2021 was $107 million and $593.6 million, respectively.

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Ibukun Ogundare

Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.

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