The World’s Hottest Stock Is a Money-Losing Tech Giant Soaring 880%

If Sea Chief Executive Officer Forrest Li is paying attention to any of this, he’s not letting on. The 42-year-old billionaire said in a video interview that he’s been working seven-day weeks in the office since April, leading his company through what may be its most pivotal year. Demand for Sea’s mobile games and online-shopping platform has surged during the pandemic, and the company is bidding on a Singapore digital-banking license to accelerate its push into financial services. Li is also looking for potential acquisitions in gaming, logistics and e-commerce.
“We don’t like to think too much about our success or how we got here,” he said when asked about Sea’s stock price. “It doesn’t matter if the environment is good or bad. It doesn’t change a company or a person.”
Even by the standards of today’s tech boom, Li’s ascent has been remarkable. Born in the Chinese port city of Tianjin, he worked for the local units of Motorola Solutions Inc. and Corning Inc. before enrolling in Stanford’s MBA program. He founded Sea, then known as Garena, in 2009 and took it public with backing from Tencent in 2017.
Read more about Li, who named himself after Forrest Gump.
After a rocky first year of trading, Sea’s stock has gone on to trounce everything in its class. Initially, the gains were fueled by the runaway success of Sea’s first self-made mobile game — a battle royale called Free Fire that has attracted as many as 80 million daily active users in more than 130 markets.
Forrest Li
Photographer: Wei Leng Tay/Bloomberg
But Sea’s e-commerce and financial services units are now increasingly important pillars of the bull case. Its Shopee platform overtook Alibaba’s Lazada in the fourth quarter of 2019 to become the top e-commerce provider in Southeast Asia, according to research firm iPrice, and the business accounted for more than 40% of Sea’s revenue in 2019, up from 2.3% in 2017.
SeaMoney, which offers everything from e-wallets to micro loans, could ultimately be just as large, according to Li. “We think this is a huge business opportunity,” he said.
Read more: Sea’s Singapore Digital Bank Bid Targets Millennials, SMEs
The soft-spoken founder has some big-name believers. Tencent still owns about 20% of Sea, and the stock was the biggest holding as of May in Noah Blackstein’s Dynamic Power Global Growth Class fund, one of the world’s top-performing equity mutual funds of the past decade. Other prominent shareholders include Chase Coleman’s Tiger Global Management LLC and Kora Management LP, an emerging markets-focused hedge fund in New York, according to regulatory filings as of March.
Kora began investing in Sea in early 2018 after meeting with Li, Daniel Jacobs, the hedge fund’s founding partner, said in an interview. “We’ve seen over the last two years a company that’s got a great team and great products going after a big market and just executing incredibly well,” he said. “We think this is a mini Tencent and has the ability to be a really successful, large company in a global context.”
Sea has already claimed the title of biggest company in Southeast Asia after its market value swelled to $65 billion, topping DBS Group Holdings Ltd. and PT Bank Central Asia for the first time earlier this year. Revenue has also grown quickly, jumping 163% to $2.2 billion in 2019, though it’s still just a fraction of DBS’s $11 billion.
As for Sea’s $1.46 billion net loss last year? Jacobs isn’t bothered by it. “They are thoughtful and prudent about building a business,” he said. “We are very much of the view thpany has all this under control.”
Not everyone is convinced.
DBS Bank Ltd. analyst Sachin Mittal downgraded his recommendation on Sea to sell in July, citing Indonesia’s new tax regulations for cross-border transactions and the likelihood of the company burning through cash to grow its payments business. “There is a tech bubble right now,” he said in an interview. “Sea’s stock is overvalued and it’s partly a reflection of the industry.”
While short sellers have closed out bets against Sea at a rapid clip in recent weeks, they still have a bearish position worth more than $3 billion, or about …
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