Singapore’s SEA on rocky start at NYSE as IPO offering price skids

Fri Oct 27, 2017 - 11:00pm GMT+0000
SEA - Connecting the dots
Singapore’s SEA on rocky start at NYSE as IPO offering price skids
Sea chairman and CEO Forrest Li rings the opening bell to marks its IPO debut

SEA Ltd. shares has fell for the third day in a row below their initial public offering price, marking a rocky start for the Singapore gaming startup as a public company.

SEA’s stock price slipped to 9.9 percent in New York trading on Wednesday to close at US$13.73. The company sold shares to investors at $15 and they rose 8.4 percent in its first day of trading last week.

Investors may be uncertain about SEA’s outlook given heavy losses as Chief Executive Officer Forrest Li expands beyond games into e-commerce and payments. The company’s underwriters also pushed hard to raise US$884 million, increasing the number of shares sold and lifting the price from an initial range to US$12 to US$14.

“By pricing above the range and upsizing the offer, they soaked up a lot of demand at the IPO,” said Matthew Kanterman, an analyst with Bloomberg Intelligence. “At this valuation, there’s high expectations for SEA to show the street it can grow into its valuation and drive profitability on top of its past investments. ”

Last week, the company rose to a market capitalization of US$5.2 billion last week before slipping to US$4.5 billion. However, this still means gains for early backers of the company including Tencent Holdings Ltd., the Ontario Teachers’ Pension Plan, Malaysia’s sovereign wealth fund and several Asian billionaires.

Founded in 2009 by Forrest Li, SEA is an online gaming company originally named Garena. He rebranded the company to reflect its regional ambition and diversification. SEA branched out with a digital payments service known as AirPay in 2014 and the mobile shopping business Shopee in 2015.

SEA’s games business, which retained the Garena name, still accounts for more than 90 percent of total revenue. Like Tencent, the company offers games for free, then collect money when players purchase virtual items like armor, weapons, or special skills. It also makes money in ecommerce from commissions and advertising while collecting fees from payments.

SEA is viewed as the test case for startups from Southeast Asia, including ride-hailing provider Grab, ecommerce site Tokopedia, and travel provider Traveloka. Goldman Sachs Group Inc., Morgan Stanley and Credit Suisse Group AG led the public offering.