S'pore games start-up Sea raises $1.2b in New York IPO

Tencent's headquarters in Shenzhen, China. Sea is often called the Tencent of South-east Asia and has benefited from the Chinese firm's support. Sea licenses games from Tencent, which also holds a stake of about 40 per cent in the smaller company.
Tencent's headquarters in Shenzhen, China. Sea is often called the Tencent of South-east Asia and has benefited from the Chinese firm's support. Sea licenses games from Tencent, which also holds a stake of about 40 per cent in the smaller company.PHOTO: BLOOMBERG

Start-up backed by China's Tencent sells 59m depositary shares at US$15 each

Singapore's Sea, South-east Asia's most valuable start-up, raised about US$884 million (S$1.2 billion) in its initial public offering (IPO) in New York.

The company sold 59 million American depositary shares for US$15 apiece, according to a statement yesterday, offering more shares and pricing them above its initial range of US$12 to US$14 each.

The total amount may be more than US$1 billion if an option to sell additional shares is exercised, according to a person familiar with the matter, asking not to be identified because the matter is private, Bloomberg reported yesterday.

The games company, backed by China's Tencent Holdings, raised the price from its initial range of US$12 to US$14 for each share. It also increased the number of shares to be sold, said Bloomberg.

Sea is often called the Tencent of South-east Asia and has benefited from the Chinese firm's support. Sea licenses games from Tencent, which also holds a stake of about 40 per cent in the smaller company.

Investors are scooping up Sea's shares despite rising losses as it diversifies into e-commerce and payments. Sea had a net loss of US$165.2 million in the first half of the year on revenue of US$195.5 million.

It is nevertheless one of the most valuable start-ups in South-east Asia. It was valued at US$3.75 billion in its fund-raising last year and will surpass US$4 billion with the IPO.

"Sea is a future-looking investment," Mr Lee Kai-Fu, founder of Beijing-based Sinovation Ventures, told Bloomberg before the offering. "Investors are betting that it can become the 800-pound gorilla that will make all the money it may have lost."

Sea was founded by Mr Forrest Li as an online gaming company in 2009 and originally named Garena.

He rebranded the company to reflect its regional ambition and diversification. Sea branched out with a digital payments service called AirPay in 2014 and the mobile shopping business Shopee in 2015.

Like Tencent, the company offers games for free, then collects money when players buy virtual items like armour, weapons or special skills. It makes money in e-commerce from commissions and advertising, while collecting fees from payments, said Bloomberg.

With Tencent's support, the start-up has drawn marquee backers such as the Ontario Teachers' Pension Plan, Malaysia's sovereign wealth fund and several Asian billionaires.

Goldman Sachs Group, Morgan Stanley and Credit Suisse Group are leading the public offering.

Separately, Financial Times reported yesterday that Sea is at risk of being ejected from Taiwan, which accounts for almost a third of its revenues. The group is under investigation in Taiwan over allegations it did not disclose its links to China, said the London-based newspaper.

Sea earned 29.1 per cent of its revenue during the six months ended June from the Taiwan market.

Taiwan's Investment Commission this week said it had launched an investigation into Shopee. This came after a Taiwan lawyer complained that the group violated a requirement that companies with a minimum 30 per cent Chinese ownership be reviewed by the government before they are allowed to operate in Taiwan, said FT.

Mr Emile Chang, executive secretary of the commission, told FT that the probe could lead to Shopee being barred from doing business in Taiwan. The commission previously ordered Alibaba and its e-commerce platform Taobao to cease their Taiwan operations in 2015.

"All foreign investments in Taiwan need approval. From this moment it seems that Shopee did not get approval from my office," FT quoted Mr Chang as saying. He added that probes are ongoing and had yet to grow to include Garena, the games business that nets more than 90 per cent of Sea's revenues.

A version of this article appeared in the print edition of The Straits Times on October 21, 2017, with the headline 'S'pore games start-up Sea raises $1.2b in New York IPO'. Print Edition | Subscribe