CFA Society Singapore
(Oct 20): Singapore’s Sea plans has priced its initial public offering of nearly 59 million American depositary shares at US$15 each to raise US$884 million ($1.2 billion), according to a press statement by the company on Friday evening.
In addition, Sea has granted the underwriters a 30-day option to purchase up to an additional 8.8 million ADSs to cover over-allotment.
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.
Sea is often called the Tencent of Southeast Asia and has benefited from the Chinese company’s support. Sea licenses games from Tencent, which also holds a stake of about 40% in the smaller company. Investors are scooping up Sea’s shares despite rising losses at the company 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’s nevertheless one of the most valuable startups in Southeast Asia. It was valued at US$3.75 billion in its 2016 fundraising and will surpass US$4 billion with the IPO.
“Sea is a future-looking investment,” Lee Kai-Fu, founder of Beijing-based Sinovation Ventures, said 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 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.
Sea’s games business, which retained the Garena name, still accounts for more than 90% of total revenue. 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.
With Tencent’s support, the startup has attracted marquee backers. They include the Ontario Teachers’ Pension Plan, Malaysia’s sovereign wealth fund and several Asian billionaires. Goldman Sachs Group, Morgan Stanley and Credit Suisse Group AG are leading the public offering.