KEVIN ZHOU

JOSEPHINE LAU

SEA LIMITED: SUSTAIN OR EXPAND?

Y
Sea Limited (NYSE: SE) was Southeast Asia’s (SEA)1 most valuable listed company with a

L
market capitalization of over USD231bn in October 2021,2 up from USD4.9bn when it went

N
public in 2017. The company began as an online game distribution platform and quickly
evolved into a digital services ecosystem with an offering that included e-commerce and digital

O T
financial services. Being mobile-centric and focusing on emerging markets were at the core of

N S
Sea Limited’s business model. In two post–IPO fundraisings in December 2020 and September
2021, it had amassed close to USD10bn from the market.3 Investors were bullish toward Sea’s

I O O
prospects for growth. Yet, the global macro socioeconomic conditions were challenging.

T P
Geopolitical tension between the US and China was increasing. Supply chains were being

C OR
disrupted. Interest rates were climbing, and the threat of global recession loomed large. How

E
would Sea Limited address these challenges and fulfill its potential for further growth?

S P Y
Trajectory from Garena to Sea Limited

I N COP
Garena Interactive Holdings Limited was founded by Forrest Li, a Chinese native and

R T
naturalized Singapore citizen on 8 May 2009. The name “Garena” stood for global arena. Its
first product, Garena+, was a gaming platform distributing online games in the greater

O
Southeast Asian (GSEA) region. The GSEA, as defined by the company, covered the combined

F NO
regions of Chinese Taipei and Southeast Asia.

Garena: The Tencent Effect

DO
In its start-up days, Garena+ was an online platform with social features such as voice chat and
a forum where SEA gamers logged on to find new games that had come online and to play with
other players. In 2010, Garena won the Southeast Asia distribution rights of a wildly popular

1
In this case, SEA in all capitals stood for the Southeast Asia region, which covered Thailand, Singapore, Vietnam, Indonesia,
Malaysia, and the Philippines. Sea, with capital S, was an abbreviation of Sea Limited. GSEA was the combined regions of
Chinese Taipei and SEA.
2
Scott Murdoch. “Singapore's Sea Ltd secures $6 billion in mega fund raising,” Reuters, 10 September 2021,
https://www.reuters.com/technology/sea-ltd-raises-about-6-billion-mega-fund-raising-2021-09-10/, accessed 22 July 2022.
3
Ibid.

Josephine Lau prepared this case under the supervision of Professor Kevin Zhou for class discussion. This case is not intended to
show effective or ineffective handling of decision or business processes. The authors might have disguised certain information to
protect confidentiality. Cases are written in the past tense, this is not meant to imply that all practices, organizations, people,
places or fact mentioned in the case no longer occur, exist or apply.

© 2022 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be digitized, photocopied
or otherwise reproduced, posted or transmitted in any form or by any means without the permission of The University of Hong
Kong.
Ref. 22/741C

Last edited: 19 November 2022

22/741C Sea Limited: Sustain or Expand?

multiplayer online strategy game, League of Legends (League), developed by Riot Games. The
LA-based studio was one of the game developers Tencent had acquired a stake in and was
League’s distributor in China.4

Garena’s success in securing the distribution rights caught the attention of Tencent, and the
Chinese video games giant quickly pledged a first investment in this start-up. This was the
beginning of a close partnership.5 Tencent saw in Garena a partner to help it access GSEA
gamers. In return, Garena benefited from privileged access to distribute Tencent’s portfolio of
games outside China. So, it was a win-win partnership.

The popularity of League quickly made Garena the largest gaming platform in the GSEA.6 As
internet penetration caught up in Southeast Asia, and low-cost smartphone and cheap data plans
became available, Forrest Li and his team spotted the potential of mobile games and quickly
devised market strategies to capture the opportunity. In 2016, Garena was able to secure the
rights to distribute another popular multiplayer online battle arena game, Arena of Valor,

Y
developed for mobile by TiMi Studio Group, a subsidiary of Tencent Games.7

N L
By the end of 2017, Arena of Valor had 10 million daily active users (DAU), cementing

O
Garena’s foothold in mobile games.

N S T
But Li was not satisfied with being just a distributor. He wanted Garena to own the intellectual

O O
property of the games.

T I P
Acquisition of 111 Dots Studio and the Free Fire Game

E C OR
In September 2017, Garena acquired 111 Dots Studio that had developed Free Fire, a mobile
battle royale game that was in beta. 8 The Vietnamese games developer had strategically

P Y
designed Free Fire to “work well on lower quality smartphones, and the app size was kept

S
N COP
small with data limitations and costs in mind.”9 When Free Fire was launched, it was another

I
instant hit, confirming the success of Garena’s gamer mindset and its hyper localization 10
efforts.

O R T
For decades, video games console manufacturers like Sony, Nintendo, and Microsoft had been

F NO
selling the console at cost and made money on games sold to gamers. When online games came
along, it entirely changed the way video games were distributed, sold, and played. It opened a
new way to monetize games using the free-to-play, pay-to-play, or freemium model. With

DO
online payment relatively underdeveloped in SEA, Li realized that for Garena to monetize the
digital entertainment market, the company needed a digital payment solution.

Airpay: Serving the Unbanked Population in SEA

In 2014, Garena launched AirPay, a prepayment system for those without credit card or internet
banking accounts in Vietnam and Thailand. Airpay operated online and off-line mobile wallet

4
In 2011, Tencent acquired 100 percent shareholding of Riot Games.
5
Jessica Tan, “Game for Garena: Singapore's Answer to Tencent and Alibaba,” Forbes.com, 23 June 2015,
https://www.forbes.com/sites/forbesasia/2015/06/23/game-for-garena-singapores-answer-to-tencent-and-
alibaba/?sh=5d8ae58d4100, accessed 22 June 2022.
6
DJY Research, “Sea Limited,” 5 May 2021, https://djyresearch.com/2021/05/05/sea-limited/, accessed 22 June 2022.
7
Wikipedia, “Arena of Valor,” https://en.wikipedia.org/wiki/Arena_of_Valor, accessed 16 September 2022.
8
A battle royale game was a multiplayer online game involving dozens to thousands of players where each player tried to
eliminate their opponents and strived to become the last player alive. It was an online game genre that became a cultural
phenomenon after it was first introduced in the early 2010s. “In beta” referred to the distribution of a new game to a group of
experienced gamers for testing prior to official release.
9
DJY Research, “Sea Limited,” 5 May 2021.
10
Hyper localization referred to a customization process where content design was localized all the way down to the region and
city level, looking at how users are searching and buying. Hyper localization took localization to a higher level by providing an
additional layer of personalization.

2
22/741C Sea Limited: Sustain or Expand?

services. It supported the exchange of hard cash into digital credits, facilitated by a network of
some 1.8 million partner-operated service counters.11

Shopee: Launched Simultaneously in Seven Countries

Thanks to the online gaming business, the company had a healthy cash flow that supported Li’s
plan for expansion. All along, market analysts believed the diversification into e-commerce
would strengthen Garena’s competitive position in SEA online gaming against market leaders
like Asiasoft in Thailand or VNG in Vietnam.12

In July 2015, while still actively developing mobile games and the e-wallet business, Garena
launched Shopee, the company’s e-commerce marketplace platform. It was introduced
simultaneously in the seven GSEA markets. “I don’t have experience in e-commerce, but we’re
now going into e-commerce. We want to continually push the boundaries,” Li told the media.13

Y
Like the games business, Shopee localized the language and the overall graphic appearance to

L
the taste of each country’s consumers. It was a pure marketplace connecting buyers and sellers,

N
and held no inventory or responsibility for fulfillment logistics. Shopee partnered with local
logistics providers and integrated AirPay into the shopping app to make the transaction

O T
relatively seamless for both buyers and sellers. The marketplace also selectively controlled the

N S
type of products they wanted on their platform, choosing high-margin products that were light
for shipping, low urgency in delivery, and unbranded categories to avoid disputes about fake

I O O
products.14 Clothing became a winning category among new merchant onboarding.

T
C OR
The Road to Going Public

P
E
Between 2014 and 2016, Garena’s online gaming business grew at a compound annual growth

P
rate (CAGR) of 45.4%, and the gross transaction value (GTV) of AirPay’s e-wallet grew at a

S Y
compound quarterly growth rate (CQGR) of 26.1%. As for Shopee, its gross merchandise value

N COP
(GMV) grew at an 81% CQGR between Q3 2015 and Q2 2017.15

I
R T
In May 2017, Garena Interactive Holdings Limited was renamed Sea Limited (Sea) and retained
the name Garena as the brand for its online gaming business. On 20 October 2017, Sea Limited

O
raised USD884mn through an initial public offering (IPO) of its shares, at USD15 per American

F NO
depositary share (ADSs). 16 The company’s stock began trading on the New York Stock
Exchange under the ticker symbol “SE” the same day.

DO
Sea Limited (NYSE: SE) was an internet company operating three digital businesses: gaming
and digital entertainment under Garena; a mobile-centric e-commerce platform under Shopee;
and digital financial services under AirPay. Digital entertainment, e-commerce, and digital
payment together formed an ecosystem that grew in a virtuous cycle. AirPay was later
rebranded SeaMoney in 2019 as the company joined the race to compete for a slice of the digital
banking business in SEA and Latin America.17 From its founding to going public in 2017, the
company had made some bold strides [see Figure 1].

11
Sea Limited, Form F-1 Registration Statement, United States Securities and Exchange Commission, 22 September 2017,
https://www.sec.gov/Archives/edgar/data/1703399/000119312517291352/d363501df1.htm, accessed 17 July 2022.
12
Jessica Tan, “Game for Garena,” Forbes.com, 23 June 2015.
13
Ibid.
14
DJY Research, “Sea Limited,” 5 May 2021.
15
Sea Limited, Form F-1 Registration Statement, United States Securities and Exchange Commission.
16
An American depositary share (ADS) was a USD-denominated equity share of a foreign-based company available on an
American stock exchange.
17
Doris Yu, “Sea joins Singapore’s digital banking race,” Tech in Asia, 7 January 2020, https://www.techinasia.com/sea-joins-
singapore-digital-bank-race, accessed 4 September 2022.

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22/741C Sea Limited: Sustain or Expand?

L Y
O N T
N S
Figure 1: Milestones from Garena to Sea Limited18

T I O P O Global Competitive Landscape

C OR
Euromonitor data indicated that the world’s e-commerce market recorded a retail sales value of

E
USD3,191.18bn in 2021. Of this, mobile e-commerce accounted for 58%.19 Asia Pacific20 was

P
the largest region, taking up the lion’s share of 47%, followed by North America, which

S Y
included the US and Canada, at 27% [see Exhibit 1].21 China at 71% share was the single

N COP
biggest market within Asia Pacific, followed by South Korea at 10% and Japan at 9%. India

I
and Indonesia were the emerging markets vying for the fourth position. Latin America and
Eastern Europe, both at 3% market share in 2021, were emerging regions targeted by global e-

R T
commerce players Amazon and Alibaba.

O
F NO
Since 2016, Google, Temasek, and Bain & Company had been tracking the development of
Southeast Asia’s internet economy. In the landmark report, SEA was projected to be the
world’s fastest-growing internet region, estimating an internet economy of approximately

DO
USD200bn by 2025.22 Firsthand online e-commerce,23 online media, and online travel were to
grow at a CAGR of 32%, 18%, and 15%, respectively, over the next 10 years. The total firsthand
e-commerce market in SEA would reach approximately USD88bn by 2025, and each SEA
country was expected to have an e-commerce market larger than USD5bn.

18
Reproduced by the author based on information from “Investor Presentation September 2018,” company presentation, Sea
Limited, http://cdn.garenanow.com/webmain/static/resource/seagroup/press/Investor percent20Presentation.pdf, accessed 17
July 2022.
19
E-commerce in Euromonitor’s definition included sales of consumer goods to the public via the internet. The figure included
sales through mobile phones and tablets. E-commerce also included sales generated through pure e-commerce websites and
through sites operated by store-based retailers. The figure also covered merchant sales through e-commerce marketplaces such
as Amazaon.com, or eBay.com.
20
Asia Pacific region in Euromonitor’s definition included 46 regions/countries: Afghanistan, American Samoa, Armenia,
Azerbaijan, Bangladesh, Bhutan, Brunei Darussalam, Cambodia, China, Fiji, French Polynesia, Guam, Hong Kong China,
India, Indonesia, Japan, Kazakhstan, Kiribati, Kyrgyzstan, Laos, Macau China, Malaysia, Maldives, Mongolia, Myanmar,
Nauru, Nepal, New Caledonia, North Korea, Pakistan, Papua New Guinea, Philippines, Samoa, Singapore, Solomon Islands,
South Korea, Sri Lanka, Taiwan China, Tajikistan, Thailand, Tonga, Turkmenistan, Tuvalu, Uzbekistan, Vanuatu, Vietnam.
21
Euromonitor data, retrieved 22 July 2022.
22
Google and Temasek, “e-conomy SEA: Unlocking the USD200 billion digital opportunity in Southeast Asia,” May 2016,
https://storage.googleapis.com/gweb-economy-sea.appspot.com/assets/pdf/e-Conomy_SEA_2016_report.pdf, accessed 23
September 2022.
23
Firsthand online e-commerce referred to online spend on electronics, apparel/clothing, household goods, and food/grocery.

4
22/741C Sea Limited: Sustain or Expand?

Roaring 20s—the SEA Digital Decade24

The 2021 edition of the e-conomy SEA Report raised the estimate of SEA’s digital economy
to USD1trn in 2030, covering sectors of e-commerce, transport and food, online travel, online
media, and financial services. 25 Growth was driven by accelerated conversion of digital
consumers—8 out of 10 SEA internet users were digital consumers, representing a market of
350 million consumers. The pandemic was a catalyst for new online service as well as
increasing spending and frequency of use. The tracking study also confirmed that digital
consumption became a way of life for millions of Southeast Asians. As many as 80% of digital
consumers were satisfied with the digital services they used.

The region’s internet economy was valued at USD174bn in 2021, a CAGR of 49%, and was
anticipated to grow to USD363bn in 2025.26 All six markets in SEA experienced a double-digit
CAGR in 2021: Indonesia at 49%, Malaysia at 47%, Singapore at 35%, Thailand at 51%,
Vietnam at 31%, and the Philippines at 93%. The study also found e-commerce to be the biggest

Y
growth driver until 2025, as the sector’s GMV grew at 62% CAGR in 2021 [see Exhibit 2].

N L
Just as consumers were happy with digital consumption, the new generation digital merchants
were also very satisfied with the platforms they used to sell their goods. Digital financial

O T
services were critical enablers as 9 out of 10 digital merchants accepted digital payment, and

N S
with that trend, the study asserted that digital lending would be a key growth area.27

I O O
Robust growth fundamentals, successful exits, and supportive government policies had

T P
prompted an unprecedented inflow of global capital into the region, targeting e-commerce and

C OR
financial services.28 The flood of investments had ushered in a new era for SEA, now “home to

E
23 unicorns,”29 out of which 11 e-commerce and financial services joined the league in 2021.30

P
Logistics became an attractive investment segment in e-commerce, as marketplace platforms

Y
in the region matured.

I S
N COP
The Google, Temasek, and Bain study projected robust growth from each country leading up
to 2030 [see Exhibit 2]. By then, Indonesia’s digital economy would likely grow to USD330bn

R T
in GMV, twice as big as the SEA region’s total in the year 2021. “The phenomenal growth we

O
see in Southeast Asia reinforces our view that the region will define the future of global digital

F NO
ecosystems,” said Stephanie Davis, Vice President, Google Southeast Asia.

Latin America: Smartphone Adoption Drove Mobile Economy

DO
The pandemic had hastened the development of digital transformation, attributed to the
robustness of telecommunications infrastructure and the flexibility of many Latin American
governments. 31 GSMA 32 estimated smartphone connections in the region would reach 500

24
This term was borrowed from “e-Conomy SEA Report 2021” published by Google, Temasek, and Bain & Company,
November 2021, https://services.google.com/fh/files/misc/e_conomy_sea_2021_report.pdf, accessed 23 September 2022.
25
Google, Temasek, and Bain & Company. “e-conomy SEA 2021 Roaring 20s: The SEA Digital Decade,” November 2021.
26
Ibid.
27
Ibid.
28
Google, Temasek, and Bain & Company. “e-conomy SEA 2021 Roaring 20s: The SEA Digital Decade,” November 2021.
29
The term “unicorn” is commonly used in the venture capital industry to refer to privately held start-up companies with a value
of over USD1bn.
30
Miguel Cordon, “SEA’s internet economy may hit $1t in GMV by 2030: report,” TechinAsia, 10 November 2021,
https://www.techinasia.com/seas-internet-economy-hit-1t-gmv-2030-report, accessed 12 September 2022.
31
Angel Melguizo, Eduardo Salido Cornejo, and Welby Leaman, “A faster path to digital transformation in Latin
America,” OECD Development Matters, https://oecd-development-matters.org/2022/03/02/a-faster-path-to-digital-
transformation-in-latin-america/, accessed 13 September 2022.
32
GSMA was a global organization representing mobile operators and organizations across the mobile ecosystem and adjacent
industries. The organization published regular updates on the industry including the series of “The Mobile Economy 2022”
and the country reports referenced in this case.

5
22/741C Sea Limited: Sustain or Expand?

million by the end of 2021, representing an adoption rate of 74%.33 Between 2021 and 2025,
Latin America would add 100 million smartphone connections, taking the adoption rate to over
80%. It would further drive mobile internet adoption, estimated to rise to 423 million in 2025,
enabling more people to access digital services for the first time. Brazil would lead the region
in the number of smartphone connections, growing to 218 million smartphone connections in
2025 [see Exhibit 3].

Major Players in E-Commerce

Amazon.com, Inc., Alibaba Group Holdings Ltd., and JD.com Inc. were three global market
leaders. Amazon and Alibaba were neck and neck; each had a 15.7% share of the global market,
while JD.com had an 11.5% share [see Exhibit 4]. Besides the top three, the rest of the players
all had a low single-digit percentage share of the market. The absence of a market leader that
could dominate all regions was confirmed in the regional line-up as recorded in Asia Pacific
and Latin America. Regional players such as MercadoLibre, Inc. (NASDAQ: MELI) had a

Y
much stronger grip on market share in Latin America. In Asia Pacific where China occupied

L
71% market share, the three Chinese market leaders, Alibaba, JD.com, and Pinduoduo, together

N
seized over 60% market share [see Exhibit 4]. Of the top 10 players, five were Chinese
merchants, and another five from South Korea. Japanese player Rakuten Group managed to

O T
secure a 2.3% share because it dominated the domestic market. Since China was relatively

N S
mature, key industry players all had their eyes set on the two biggest growth markets in Asia
Pacific—Indonesia and India—as well Brazil, the single largest market in Latin America.

T I O P O
Lazada, Alibaba’s E-Commerce Brand for Global Markets

C OR
Lazada Group was founded by Germany’s Rocket Internet GmbH in 2012, offering household

E
goods, consumer electronics, sports equipment, and toys to the SEA markets. Its founding

P
coincided with Amazon’s move to step up its activities in the region. Before Lazada, Rocket

S Y
Internet had launched multiple e-commerce websites, mostly in emerging markets, including

N COP
Zando and Jumia in Africa, Zalando in Europe, and Dafiti in Brazil.

I
R T
In 2016, Alibaba paid approximately USD1bn in what was said to be the Chinese e-commerce
leader’s “biggest deal overseas” in return for a controlling stake in Lazada Group.34 The deal

O
valued Lazada at USD1.5bn, at a time when the e-commerce market for B2C sales in 2015

F NO
across all SEA markets was “just USD10.5bn,” according to Frost & Sullivan.35 A year later,
Alibaba announced an additional USD1bn investment, boosting its stake in Lazada to 83%.36

DO
Lazada operated LazMarketplace for online retailing, LazMall for brands to reach their
customers, and LazGlobal for cross-border e-commerce in SEA. Since 2017, Lazada also sold
selected items from Alibaba’s Taobao marketplace. In 2018, Alibaba invested another USD2bn
in Lazada, replaced the CEO, and took full control of the company. It was reported that Alibaba
planned to expand into Europe with the Lazada brand, alongside the group’s global e-commerce
AliExpress, which already had a presence in the region.37

33
The Mobile Economy Latin America 2021, GSMA, https://www.gsma.com/mobileeconomy/latam/, accessed 13 September
2022.
34
Jeremy Wagstaff, “Rocket's Lazada gets $100 million in bid to be Southeast Asia's Amazon,” Reuters, 20 June 2013,
https://www.reuters.com/article/idUSBRE95J02E20130620, accessed 25 July 2022.
35
Paul Carsten, Rama Venkat Raman, “Alibaba buys control of Lazada in $1 billion bet on SE Asia ecommerce,” Reuters, 12
April 2016, https://www.reuters.com/article/idUSKCN0X90HT,
accessed 25 July 2022.
36
Aradhana Aravindan, “Alibaba spending $1 bln to raise stake in Southeast Asia's Lazada,” Reuters, 28 June 2017,
https://www.reuters.com/article/idUSL3N1JP2LJ, accessed 25 July 2022.
37
Fanny Potkin and Brenda Goh, “Alibaba looks to expand Southeast Asian arm Lazada to Europe,” Reuters, 28 April 2022,
https://www.reuters.com/business/alibaba-looks-expand-southeast-asian-arm-lazada-europe-sources-2022-04-28/, accessed 25
July 2022.

6
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Other than expanding its e-commerce marketplace beyond SEA, Lazada was also beefing up
its digital financial services. In August 2022, Lazada stepped up its investment in DANA, an
Indonesian digital wallet provider that was partly owned by Jack Ma’s Ant Group Co. 38
Alibaba was also a lead investor in the USD168mn financing in Malaysia’s largest e-wallet
company Touch ‘n Go.39

Tokopedia (GoTo), Indonesia’s Homegrown Digital Services Player

An archrival of Sea Limited, Tokopedia began as an indigenous web commerce platform in
Indonesia. The company merged with on-demand services app Gojek in 2021. PT GoTo Gojek
Tokopedia Tbk (GoTo) was officially listed on the Indonesian Stock Exchange on 11 April
2022 with a market value of USD32bn. It was Indonesia’s fourth largest company, after two
banks and a state-owned telecommunication company.40 GoTo boasted an integrated digital
ecosystem comprising on-demand transport, e-commerce, food and grocery delivery, logistics
and fulfillment, and financial services, available through the Gojek, Tokopedia and GoTo

Y
Financial platforms.

N L
William Tanuwijaya, one of the two founders of Tokopedia, was born and raised in a small
village in Java, Indonesia. He reflected on the deprivation he experienced growing up and

O T
turned that into a mission for Tokopedia — “to democratize commerce through technology.”41

N S
The name Tokopedia was derived from toko, which was “shop” in Indonesian, with
encyclopedia, underpinning the founders’ vision “to build an all-encompassing marketplace for

I O O
Indonesians.”42

T
C OR P
Tokopedia started as a web commerce platform in 2009. It received seed funding of

E
USD168,399 (IDR2.5bn) from PT Indonusa Dwitam, a diversified investment holding
company in Indonesia. In subsequent years, the budding e-commerce platform continued to

P Y
attract global venture capital from key players such as SoftBank and Sequoia Capital. In 2017,

S
N COP
Tokopedia received a USD1.1bn investment from Alibaba, making the company Indonesia’s

I
most valuable unicorn at the time, with a USD7bn valuation. 43

R T
Tanuwijava did not shy away from the fact that he was inspired by the Alibaba business model

O
to empower small businesses in Indonesia. When Alibaba eventually became Tokopedia’s

F NO
investor, Tanuwijava was able to send management teams to learn from the Chinese giant. “We
can see while Tokopedia continuously grows, but the past two years (2018–2020) we are
growing faster than before, and that is basically because of Alibaba is one of our closest

DO
partners,” admitted Tanuwijava.44

38
Yoolim Lee and Olivia Poh, “Ant-Backed Dana Bags $250 Million From Sinar Mas, Alibaba,” Bloomberg.com, 10 August
2022, https://www.bloomberg.com/news/articles/2022-08-10/ant-backed-dana-bags-250-million-from-sinar-mas-
alibaba?leadSource=uverify percent20wall, accessed 8 September 2022.
39
Yoolim Lee and Bloomberg, “New CEO of Alibaba’s most important international business unit wants to rival Amazon and
Zalando in Europe. ‘We go where brands want us to go.’,” Fortune, 1 September 2022,
https://fortune.com/2022/09/01/alibaba-lazada-ceo-james-dong-europe/, accessed 8 September 2022.
40
Ayman Falak Medina, “Indonesia’s GoTo Goes Public, Market Capitalization of US$32bn,” ASEAN Briefing, 12 April 2022,
https://www.aseanbriefing.com/news/indonesias-goto-goes-public-market-capitalization-of-us32bn/, accessed 9 September
2022.
41
PT Tokopedia, company website, accessed 9 September 2022.
42
Ursula Florene, “Inside Tokopedia, the Indonesian e-commerce company offering almost everything,” KrAsia, 22 March 2021,
https://kr-asia.com/inside-tokopedia-the-indonesian-e-commerce-company-offering-almost-everything, accessed 9 September
2022.
43
Khamila Mulia, “Tokopedia surges to most valuable unicorn in Indonesia after $1b funding from SoftBank,” KrAsia, 22
November 2018, https://kr-asia.com/tokopedia-surges-to-most-valuable-unicorn-in-indonesia-after-1b-funding-from-softbank,
accessed 9 September 2022.
44
Hans Tung and Dimitra Taslim, “Tokopedia Drives 1.5% of Indonesia’s GDP – How William and Patrick Did It,” GGV
Capital, Evolving for the Next Billion Podcast, Season 2, Episode 6, 4 May 2020, https://nextbn.ggvc.com/podcast/s2-ep-6-
william-and-patrick-of-tokopedia-indonesias-gdp/, accessed 9 September 2022.

7
22/741C Sea Limited: Sustain or Expand?

The collaboration between Tokopedia and Gojek dated to 2015 when Tokopedia pioneered the
use of ride-hailing drivers to deliver e-commerce orders. Gojek launched the on-demand
services app in 2015, and a mobile wallet GoPay in 2016. Two years later, Gojek expanded
into Vietnam and Singapore, and acquired local payment gateway Midtrans and off-line
payment processor Kartuku. In the same year, Tokopedia launched a social e-commerce
platform, Mitra Tokopedia, connecting millions of owners of mom-and-pop stores and similar
small local businesses with local consumers. In 2020, Tokopedia had 6.4 million merchants on
its platform; 86% percent were first-time entrepreneurs. The company was contributing 1.5%
of Indonesia’s GDP as a whole.45

“Today, Indonesia is a one trillion-dollar economy, and we contribute 1% to

1.5% of Indonesia economy. In the next 10 years, Indonesia will become a $5
billion economy and if by that time Tokopedia contributes 5% of Indonesian
economy,” said Tanuwijava.46

Y
A broad range of digital services were offered through the Tokopedia App, including online

L
retail, digital payments, ticket sales for trains and planes, hotel bookings, movie and event

N
tickets, subscription plans for streaming services, and even investment products.

O T
MercadoLibre, the eBay of Latin America47

N S
MercadoLibre, Inc. (MELI) was the largest e-commerce player in Latin America, operating in

I O O
18 countries, including Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican

T P
Republic, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, El

C OR
Salvador, Uruguay, and Venezuela. 48 The company offered consumers an integrated e-

E
commerce and digital payment through six branded services: the MercadoLibre marketplace,
the Mercado Pago digital payment solution, the Mercado Envios logistics service, the

P Y
MercadoLibre ads solution, the MercadoLibre classifieds service, and the Mercado Shops

S
N COP
online storefront solution.

I
In 2021, Brazil recorded USD3.9bn or 55% of MELI’s total consolidated revenue, while

R T
Argentina scored 22% and Mexico at 17%. MELI reported a consolidated revenue of

O
USD7.07bn in 2021.

F NO
Established in Argentina in 1999 by cofounder and CEO Marcos Eduardo Galperín while he
was at Stanford University, the company received seed funding from venture capitalists

DO
including JP Morgan Partners, Goldman Sachs, and GE Capital.49

In 2001, MercadoLibre expressed interest in acquiring iBazar Com Ltda, the Brazilian
subsidiary of iBazar SA owned by eBay, and the two companies arrived at a strategic agreement
to exchange ownership interests.50 The agreement gave eBay a 19.5% stake51 in the start-up and
allowed both companies “to share best practices.”52 At the time, iBazar was the leading online
auction site in Brazil, and Mercado Libre’s acquisition underscored the business model the
company was pursuing—an online trading platform that allowed buyers and sellers to conduct

45
Ibid.
46
Ibid.
47
Paul Sawers, “eBay divests majority of its stake in Latin American ecommerce giant MercadoLibre,” Venture Beat, 13 October
2016, https://venturebeat.com/business/ebay-divests-ecommerce-mercadolibre/, accessed 17 September 2022.
48
MercadoLibre, Inc., Form 10-K for the Fiscal Year Ended December 31, 2021, United States of Securities and Exchange
Commission, 2022, https://investor.mercadolibre.com/static-files/5d0af003-73a2-4e5e-898c-95957b644583, accessed 19
September 2022.
49
Wikipedia, “Mercado Libre,” https://en.wikipedia.org/wiki/Mercado_Libre, accessed 17 September 2022.
50
eBay, “eBay to Sell a Majority of its Stake in MercadoLibre, Inc.,” company announcement, 12 October 2016,
https://www.ebayinc.com/stories/news/ebay-to-sell-a-majority-of-its-stake-in-mercadolibre-inc/, accessed 17 September 2022.
51
Wikipedia, “Mercado Libre,” https://en.wikipedia.org/wiki/Mercado_Libre, accessed 17 September 2022.
52
eBay, “eBay to Sell a Majority of its Stake in MercadoLibre, Inc.,” company announcement, 12 October 2016.

8
22/741C Sea Limited: Sustain or Expand?

e-commerce via a fixed price or auction format. eBay pledged not to compete with Mercado
Libre within the term of the strategic agreement that expired in 2006.53

The company went public in August 2007, and eBay disposed of its stake in MELI in 2016.

Like Southeast Asia, Latin America was an equally diverse region. The markets differed in the
size of population, the developmental stage, government regulations, and customs and cultures.
MELI, Goto, and Sea shared a common characteristic of being highly adaptive to individual
market conditions.

Many of MELI’s service offerings were initially designed to support the e-commerce business
on the MercadoLibre marketplace, for instance, Mercado Pago’s digital payment solutions.
Over the years, Mercado Pago was made available to third-party customers beyond
MercadoLibre marketplace. Mercado Pago’s fintech solutions generated revenue through
payment processing, credit by installments, cash withdrawals, interest and cash advance fees,

Y
and transaction fees from Mercado Pago credit and debit cards, etc. It was a host of digital

L
financial solutions targeting the small merchants and the vast population underserved by the

N
traditional banking industry.

O T
Mercado Envios, MELI’s logistics solution, provided sellers on the MercadoLibre marketplace

N S
with fulfillment and warehousing services, and connected them to third-party logistics

O O
providers for a seamless buyer experience. To further enhance access and speed of delivery,

I P
MELI launched a fleet of dedicated aircraft, Meli Air, shuffling between Brazil and Mexico,

T
two of its largest markets. The company also developed a network of neighborhood stores for

C OR
buyers and sellers to drop off, pick up, or return packages.

P E
The COVID outbreak narrowed the gap between losses and breakeven for MELI. In 2021, the

Y
S
company generated a net income of USD83.3mn, compared to losses of USD0.7mn in 2020

N COP
and USD172mn in 2019.54

I
R T
Online Games

O
New Zoo, the industry source for games-market insights and analytics, estimated the global

F NO
games market would reach USD225.7bn and 3,534 million players by 2025.55 In terms of
player distribution, Asia Pacific was by far the largest market with 1,746 million players,
representing over half of the global market [see Exhibit 5]. New Zoo estimated there were

DO
1,045 million PC players, 2,675 million mobile players, and 603 million console players in
2022. Mobile was by far the largest games segment.56

China was the highest-grossing market in games revenue, estimated at USD50.10bn in 2022,
followed closely by the US at USD47.62bn [see Exhibit 6]. Brazil was the only emerging
market in the Top 10 Global Markets league, with a revenue of USD2.68bn and over 100
million players [see Exhibit 6].

Among the Top 10 Global Companies, Tencent, Sony, Apple, Microsoft, and Google were all
leading technology and media companies. Tencent led with annual revenue reaching USD27bn
in 2021 [see Exhibit 7]. In January 2022, Microsoft announced its acquisition of Activision
53
eBay, IPO Prospectus, United States Securities and Exchange Commission, 9 August 2007,
https://www.sec.gov/Archives/edgar/data/1099590/000119312507178904/d424b1.htm#toc, accessed 17 September 2022.
54
MercadoLibre, Inc., Form 10-K for the Fiscal Year Ended December 31, 2021, United States of Securities and Exchange
Commission, 2022.
55
Global Games Market Report, New Zoo, July 2022, https://newzoo.com/products/reports/global-games-market-report,
accessed 4 September 2022.
56
“2022 Global Games Market Per Segment With Year-On-Year Growth Rate,” New Zoo, https://newzoo.com/wp-
content/uploads/2016/03/Global-Games-Market-per-Segment.png, accessed 15 October 2022.

9
22/741C Sea Limited: Sustain or Expand?

Blizzard, publisher of global hit games Call of Duty and World of Warcraft.57 The acquisition
placed Microsoft as number two in the global league, with a combined revenue of USD21bn,
displacing Sony.

Sea Limited was a latecomer to the global league but posed fierce growth at an exponential rate
of 114% year-over-year increase [see Exhibit 6]. Its mobile game Free Fire continued to
maintain top global rankings in downloads and in revenue metrics [see Exhibit 8].

Mobile Wallet
A market study projected the mobile wallet market would record a valuation of USD970bn by
the year 2030, driven by supportive government initiatives. 58 Rising mobile payments via
smartphone prompted device manufacturers such as Samsung and Apple to cater to consumers’
demands by incorporating a range of mobile wallets in their devices. The push would likely
increase the share of transaction value from the device manufacturers segment, as projected by

Y
the study.

N L
Asia Pacific accounted for more than 50% of the mobile wallet revenue share in 2021, as
penetration of mobile banking channels in the region was high. In China, the huge market was

O T
dominated by two main providers, Alibaba’s AliPay and Tencent’s WeChat Pay or Weixin Pay.

N S
Among the developing economies in SEA, Vietnam was a particularly crowded market, with
more than 40 e-wallets in 2021. To compete for market share, many e-wallet players chose to

I O O
partner with e-commerce platforms to increase return traffic and build loyalty. According to

T P
the Q&Me Vietnam market research report, no single player was able to dominate the market

C OR
in Vietnam. About 90% of e-wallet transactions in Vietnam were processed through the

E
platforms MoMo, ZaloPay, and Moca. 59 In spite of Shopee being Vietnam’s largest e-
commerce platform, SeaMoney failed to dominate. Lazada integrated the eMonkey payment

P Y
method into its e-commerce business in 2019.

I S
N COP
Indonesia was another competitive market, with over 50 digital wallets. Even the small mom-
and-pop stalls in rural villages accepted e-wallet payments because transaction fees were

R T
nominal and it made the sector seemed lucrative. Acquisition costs for customers and

O
merchants, however, were relatively high and loyalty remained low. It was not uncommon for

F NO
consumers in SEA to use more than one e-wallet. Singapore bank DBS’s research suggested
“many players would face a severe cash burn,” 60 despite a fivefold increase in e-wallet
transaction value to USD50bn by 2025 in the region.

DO
Increasingly, players in the mobile payments sector were expanding their business by shifting
focus to consumer loans, credit cards, and other insurance products that would enhance their
profit margin.

57
Brendan Sinclair, “Microsoft acquires Activision Blizzard,” Games Industry.Biz, 18 January 2022,
https://www.gamesindustry.biz/report-microsoft-to-acquire-activision-blizzard, accessed 5 September 2022.
58
“Mobile Wallet Market to value USD 970 Bn by 2030, Says Global Market Insights Inc.,” Bloomberg Asia Edition, 15
September 2022, https://www.bloomberg.com/press-releases/2022-09-15/mobile-wallet-market-to-value-usd-970-bn-by-2030-
says-global-market-insights-inc, accessed 20 September 2022.
59
“E-wallet groups take on losses to get ahead,” Vietnam Investment Review, 25 May 2019, https://vir.com.vn/e-wallet-groups-
take-on-losses-to-get-ahead-84419.html, accessed 22 July 2022.
60
“The Changing Landscape of E-wallet Players in Asia,” DBS SME Banking, https://www.dbs.com.cn/sme/research-and-
insights/business-insights/the-changing-landscape-of-e-wallet-players-in-asia, accessed 20 September 2022.

10
22/741C Sea Limited: Sustain or Expand?

Sea Limited: A Global Ambition

Following its IPO, Sea’s share price surged. When its shares reached an all-time high of
USD372.20 in October 2021, the company had a market capitalization of USD208bn.61 The
investment market was bullish toward Sea’s potential and enthusiastic in arming the tech giant’s
war chest for expansion [see Exhibit 9]. Following its floatation, Li and his team focused on
scaling the business, building market dominance, and maintaining a strong cash balance as they
executed an expansion strategy aimed at leveraging efficiencies across its ecosystems.

Free Fire, the self-developed mobile game, was launched on 4 December 2017, on both the
iOS App Store and Google Play Store in multiple markets around the world. The game was an
instant hit and achieved 6 million DAUs in 2017, paving the way for Garena’s dominant
position in the mobile games segment and in the GSEA and Latin America. In 2018, mobile
games contributed 85% of Garena’s total revenue and self-developed games contributed 45%.
Twenty-eight percent of Garena’s revenue came from outside its core GSEA markets.62 Free

Y
Fire was one of the most popular games in Latin America. It was ranked at the top by monthly

L
active users, number of downloads, and consumer spending in Brazil, and was in the top five

N
in Mexico and Argentina.

O T
At the end of 2021, Free Fire was the number-one most-downloaded mobile game globally for

N S
three consecutive years in a row.63 It continued to have “one of the largest and most engaged

I O O
user communities of any game in history,” said Forrest Li in the company’s 2021 fourth quarter

T P
and full-year earnings call with investors. It achieved many milestones, including the highest-
grossing mobile game in SEA and Latin America for 10 consecutive quarters at the end of 2021,

C OR
and it was the highest-grossing mobile battle royale game in the US in 2021. It contributed to

E
Garena’s fast-growing revenue, from slightly under USD0.5bn in FY2017 to USD4.3bn in

P Y
FY2021 [see Exhibit 10].

S
N COP
A Chinese native, Li learned from his peers in China that execution with speed and

I
determination mattered, but that alone was insufficient. Despite the early successes, he had a

R T
sense of humility and remained cognizant of the vulnerability of the technology business and
the pervasive market threats.64

O
F NO
Sea continued to invest heavily in Shopee, despite the hefty costs the e-commerce was incurring
to the company’s bottom line. In 2018, Sea reported full-year revenue of USD1,048.7mn and a
negative EBITDA of (USD694mn), attributed to losses incurred by Shopee [see Exhibit 10].

DO
Although Shopee’s annual GMV continued to grow in the GSEA and had clearly secured
market leadership as the most-downloaded app in the shopping category, the shipping subsidies
and huge sales and marketing expenses were hurting the bottom line. Still, Li was confident
that Shopee’s rapid growth and ascent to regional market leadership over a short time confirmed
Sea’s strategy of a mobile-centric and socially engaging marketplace. In Indonesia, Shopee had

61
“Analysing Shopee's India Exit from a Singapore perspective,” Retail.com from The Economic Times, 4 April 2022,
https://retail.economictimes.indiatimes.com/news/e-commerce/e-tailing/analysing-shopees-india-exit-from-a-singapore-
perspective/90641784, accessed 20 July 2022.
62
Sea Limited, “Sea Limited Reports Fourth Quarter and Full Year 2018 Results,” 27 February 2019,
https://cdn.sea.com/webmain/static/resource/seagroup/pressrelease/2019-02-27 percent20Sea percent20Fourth
percent20Quarter percent20and percent20Full percent20Year percent202018 percent20Results.pdf, accessed 6 September
2022.
63
Sea Limited, “Sea Limited Reports Fourth Quarter and Full Year 2021 Results,” 1 March 2022,
https://cdn.sea.com/webmain/static/resource/seagroup/website/investornews/4Q2021/7xN3dPdXRT0z3Oe5/2022.03.01
percent20Sea percent20Fourth percent20Quarter percent20and percent20Full percent20Year percent202021
percent20Results.pdf, accessed 4 September 2022.
64
David Kuo, “Commentary: The incredible rise of Forrest Li, modest founder of Singapore’s most valuable listed company,”
Channel News Asia, 9 April 2021, https://www.channelnewsasia.com/commentary/forrest-li-sea-shopee-garena-billionaire-
lion-city-sailors-news-203361, accessed 16 September 2022.

11
22/741C Sea Limited: Sustain or Expand?

taken over regional rivals such as Alibaba’s Lazada and local leader Tokopedia as the largest
e-commerce platform.

In 2019, a localized Shopee was launched in Brazil, followed by new operations in Mexico,
Chile, and Colombia in 2021.65 Two years after its launch in Brazil, Shopee was fast gaining
traction, growing at nearly 400% year-on-year.66

While the demand for digital financial services was growing, filling the gap required approval
from the local regulatory regimes. Sea’s strategy was to integrate its digital payment services
with gaming and e-commerce, and to customize the service to local needs. Sea was licensed to
provide electronic money services in the six SEA markets and provide loans in Indonesia,
Thailand, the Philippines, and Malaysia. Its products and services were offered under a variety
of brands including ShopeePay, SPayLater, SeaBank, and other digital financial services brands.
In late 2019, the tech giant introduced SeaMoney as the overall brand for its digital financial
services. In May 2022, Shopee received authorization from Brazil's central bank to operate a

Y
payment institution and an electronic money issuer.67

N L
Sea’s ambition did not stop at geographic expansion. The company was also exploring new

O
streams of business that would leverage its ecosystem. In 2021, Sea rebranded the gourmet

T
media platform Foody it acquired in Vietnam as ShopeeFood to tap the food delivery service

N S
in Vietnam, Indonesia, Thailand, and Malaysia. Market analysts warned that Sea’s move into

O O
the food delivery business had triggered an alarm to incumbent ride-hailing and delivery players

I P
such as Grab and GoJek, speeding a wave of consolidation through mergers and acquisitions in

T
the region.68

E C OR
India and the Expansion Roller Coaster Ride in 2021

P Y
Sea was rigorously implementing its growth plans with the investment market’s signal of

S
N COP
approval, as witnessed in the dramatic surge of its share price.

I
India, with a population of 1.5 billion people, was high on Sea’s agenda. As smartphone

R T
penetration in India increased in recent years, the country became the largest market for mobile

O
game downloads. Mobile games generated more than USD86.3bn in revenue in India, and Free

F NO
Fire was the country’s most-downloaded mobile game in 2020.69 Meanwhile, Sea was also
busy preparing for Shopee’s launch in this populous market.

DO
A high-profile recruitment video, which was posted online in early August 2021, announced
that “Shopee is coming to India!” and promised free delivery and no commission to lure
sellers.70 During its soft launch, Shopee India rolled out some heavy promotion campaigns,

65
Wikipedia, “Shopee” https://en.wikipedia.org/wiki/Shopee#:~:text=In percent202019 percent2C percent20Shopee
percent20entered percent20the,introduced percent20its percent20marketplace percent20in percent20Poland, accessed 17 July
2022.
66
Sea Limited, “Sea Limited Reports Fourth Quarter and Full Year 2021 Results,” 1 March 2022,
https://cdn.sea.com/webmain/static/resource/seagroup/website/investornews/4Q2021/7xN3dPdXRT0z3Oe5/2022.03.01
percent20Sea percent20Fourth percent20Quarter percent20and percent20Full percent20Year percent202021
percent20Results.pdf, accessed 6 September 2022.
67
“Shopee is now authorized to operate as a payment institution in Brazil,” Latin America Business Stories, 2 May 2022,
https://labsnews.com/en/news/business/shopee-is-now-authorized-to-operate-as-a-payment-institution-in-brazil/, accessed 16
September 2022.
68
Anshuman Daga, Fanny Potkin, “In Southeast Asian internet battle, Sea’s rise sends rivals scrambling,” Reuters, 23 March
2021, https://www.reuters.com/business/media-telecom/southeast-asian-internet-battle-seas-rise-sends-rivals-scrambling-
2021-03-23/, accessed 17 July 2022.
69
“Garena Free Fire is 2020's most downloaded mobile game so far, PUBG Mobile finishes fourth,” Sportskeeda, 16 July 2021,
https://www.sportskeeda.com/free-fire/news-top-5-most-downloaded-mobile-games-2020, accessed 22 July 2022.
70
Fanny Potkin, “Shopee dips toe in India e-commerce market with seller recruitment campaign,” Reuters, 30 August 2021,
https://www.reuters.com/business/retail-consumer/shopee-dips-toe-india-e-commerce-market-with-seller-recruitment-
campaign-2021-08-30/, accessed 18 July 2022.

12
22/741C Sea Limited: Sustain or Expand?

including running four sales a day—at midnight, noon, 4 p.m., and 8 p.m. A local video-blogger
uploaded a video on YouTube boasting of bargains that went from INR49971 to INR9 for a wall
hanging, a data cable from INR1,199 to INR9, and an Apple cable from INR2,999 to INR9.72
Flash sales and deep discounts helped Shopee capture consumers, and within weeks, the e-
commerce platform became the “new love” of Indian consumers, securing the second most-
downloaded app on Google Play, and overtook major competitors like Amazon, JioMart, and
Myntra in the number of active users.73

Its meteoric rise to market leadership aroused the jealousy of India’s domestic traders, which
filed a complaint with the Confederation of All India Traders (CAIT). In January 2022, the
trade body appealed to the Competition Commission of India (CCI), alleging Shopee for
conducting business in India through a complex structure that obscured Chinese investment.74
In the following month, the Indian government banned access to 54 mobile apps, mainly
Chinese and including the Free Fire mobile game on claimed security concerns. Since June
2020, the Indian government had banned a total of 224 Chinese apps, including TikTok and

Y
WeChat.75

N L
The Free Fire ban and the roadblock to Shopee’s India expansion clouded shareholders’

O
confidence in Sea’s global ambitions. It was a major setback to Sea’s expansion, and the market

T
responded with an 18% slide in its share price, wiping more than USD16bn from its market

N S
value in a day.76 On 28 March 2022, Shopee announced that it ceased to operate in India with

O O
immediate effect.77

T I P
In Europe, Shopee was cautiously making inroads. In September 2021, the company launched

C OR
a localized Shopee in Poland, followed by France and Spain a month later.78 However, the

E
plummeting share price and Free Fire’s ban in India had significant impact on Sea’s financial

P
position. On 6 March 2022, Shopee announced that it was closing its platform in France.79 In

S Y
June 2022, it announced its exit from Spain.80

I N COP
In spite of all the ups and downs, Shopee claimed the world’s number one position in shopping

R T
apps installation in 2021, with 211 million downloads, 88% of which came from Latin America
and SEA [see Exhibit 11].

O
F NO
DO
71
One USD = 74.2547 Indian Rupees on 30 September 2021.
72
Priyanka Sahay & Chandra R Srikanth, “Singapore’s Shopee clocks over 100,000 orders a day in India,” Money Control, 25
November 2021, https://www.moneycontrol.com/news/business/startup/exclusive-singapores-shopee-clocks-over-100000-
orders-a-day-in-india-emerges-as-amazon-flipkart-challenger-7758731.html, accessed 18 July 2022.
73
Surajeet Das Gupta, “Shopee takes India’s e-commerce by storm,” Business Standard, 22 January 2022, https://www.business-
standard.com/article/companies/singapore-based-shopee-takes-india-s-e-commerce-market-by-storm-122012200021_1.html,
accessed 17 July 2022.
74
Ibid.
75
Surabhi Agarwal, “Centre issues order to ban 54 Chinese apps,” Economic Times, 14 February 2022,
https://economictimes.indiatimes.com/tech/technology/union-government-issues-fresh-orders-to-ban-over-54-chinese-
apps/articleshow/89551062.cms?from=mdr, accessed 22 July 2022.
76
“India adds 54 more Chinese apps to ban list; Sea says it complies with laws,” Reuters, 15 February 2022,
https://www.reuters.com/world/india/sea-owned-game-free-fire-unavailable-india-after-ban-chinese-apps-2022-02-15/,
accessed 22 July 2022.
77
Soumyarendra Barik and Pranav Mukul, “Explained: Why has Shopee shut shop in India?” Indian Express, 29 March 2022,
https://indianexpress.com/article/explained/shopee-exit-india-operations-explained-7842028/, accessed 22 July 2022.
78
Fanny Potkin, “Sea's Shopee to debut in Europe with Poland launch,” Reuters, 7 September 2021,
https://www.reuters.com/business/retail-consumer/seas-shopee-debut-europe-with-poland-launch-sources-2021-09-07/,
accessed 17 July 2022.
79
Samreen Ahmad, “Shopee to shut shop in France,” TechInAsia, 28 February 2022, https://www.techinasia.com/shopee-shut-
shop-france, accessed 22 July 2022.
80
Claudia Chong, “Sea’s Shopee leaves Spain, to lay off teams in South-east Asia,” Business Times, 14 June 2022,
https://www.businesstimes.com.sg/garage/seas-shopee-leaves-spain-to-lay-off-teams-in-south-east-asia, accessed 22 July
2022.

13
22/741C Sea Limited: Sustain or Expand?

Trials and Tribulations

Sea grew its revenue from USD400mn in FY 2017 to USD10bn in FY2021. Over this period,
the company continued to incur net losses, amounting to USD2bn in FY2022 [see Exhibit 10].
The company’s fast expansion was attributed to the founder’s understanding of the market and
his competitors, and the founding team’s ability to execute—to adapt and localize to the markets
they served.81 For example, Garena introduced Vietnamese and Thai football stars to the online
game FIFA when it was launched in Vietnam and Thailand. On Shopee’s platform, the
company tailored the product mix carefully to the preference of local consumers by grooming
specialized sellers who knew the market well. Recognizing the popularity of Korean fashion,
cosmetics, and other merchandise across their markets, Shopee hired a local team in South
Korea to support Korean merchants on boarding and provide training for sellers’ transition into
e-commerce, including marketing, digital payment, and logistical services.

Y
Li’s ambition was that Sea Limited would be the world’s greatest internet company in SEA.
Tencent’s early investment gave Garena a strategic advantage in development. The Chinese

L
internet giant’s participation was a boost of confidence in Forrest Li and his start-up, and helped

N
to attract family investors and institutional capital along the way. But it was a double-edged

O T
sword. Tencent’s shareholding threw Sea right into the center of the geopolitical storm between
India and China. On 4 January 2022, as part of a broader divestment strategy, Tencent offloaded

N S
14.5 million shares of Sea Limited, reducing its holding of Sea by less than 3%. However, the

I O O
market did not respond well, particularly at a time when Sea’s share price was in a downward

T P
spiral.

C OR
Institutional investors were concerned that the ban in India might just be the beginning of Sea’s

E
troubles. Reports cited Franklin Dynatech Fund and Blackrock Capital Appreciation Fund as

P Y
among the asset managers that cut their holdings in Sea in January 2022.82

S
N COP
On 9 September 2022, Shopee announced its exit from Argentina and closed local operations

I
in Chile, Colombia, and Mexico, but it would maintained cross-border operations in the three

R T
markets. 83 Garena, meantime, laid off 15% of its employees in the development studio in

O
Shanghai. Media quoted sources indicating multiple game projects were canceled at the studio.

F NO
A former Sea senior executive once told the media, “Garena aspires to be a synthesis of Tencent
and Alibaba in Southeast Asia in a very hyperlocal way—country by country.”84 With a nearly
USD1bn loss recorded in Q2 2022, Sea’s share price closed at USD59.01 on Friday, 16

DO
September 2022. As interest rates rose, inflation loomed large, and geopolitical tension around
the world heightened, would Sea shift gears from a “burn cash” strategy to find self-sufficiency
or how could Sea Limited recapture the hearts of investors and achieve its aspirations?85

81
DJY Research, “Sea Limited,” 5 May 2021.
82
“Sea's Shopee exits France a few months into Europe foray,” Straits Times, 1 March 2022,
https://www.straitstimes.com/business/companies-markets/seas-shopee-exits-france-a-few-months-into-europe-foray,
accessed 22 July 2022.
83
Fanny Potkin and Josh Ye, “Sea Ltd shuts ops in some Latam countries, cuts Free Fire staff in Shanghai,” Reuters, 9
September 2022, https://www.reuters.com/article/shopee-latam-exclusive-idCAKBN2Q91KV, accessed 20 September 2022.
84
Jessica Tan, “Game for Garena”, Forbes.com, 23 June 2015.
85
Yimei Yong. “Sea Ltd's top management to forgo salaries as firm cuts cost,” Technode Global, 15 September 2022,
https://technode.global/2022/09/15/sea-ltds-top-management-to-forgo-salaries-as-firm-cuts-cost-report/, accessed 23
September 2022.

14
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EXHIBIT 1: WORLD E-COMMERCE MARKET, 202186

L Y
O N T
I O N O S
T
C OR P
P E Y
I S
N COP
O R T
F NO
DO

86
Euromonitor data, retrieved 22 July 2022.

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22/741C Sea Limited: Sustain or Expand?

EXHIBIT 2: SEA INTERNET ECONOMY PROJECTIONS87

L Y
O N T
I O N O S
T
C OR P
P E Y
I S
N COP
O R T
F NO
DO

87
Google, Temasek, and Bain & Company. “e-conomy SEA 2021 Roaring 20s: The SEA Digital Decade,” November 2021,
https://services.google.com/fh/files/misc/e_conomy_sea_2021_report.pdf, accessed 23 September 2022.

16
22/741C Sea Limited: Sustain or Expand?

EXHIBIT 3: TOP-FIVE SMARTPHONE MARKETS IN LATIN AMERICA88

SMARTPHONE CONNECTIONS IN 2025

Brazil Mexico Colombia Argentina Peru

218 million 94 million 56 million 45 million 29 million

L Y
O N T
N S
EXHIBIT 4: 2021 E-COMMERCE MARKET
BY COMPANY SHARE

T I O P O Global Retail Value: USD 3,191.18 bn

C OR
Top 20 Companies breakdown %

E
1. Amazon.com Inc 15.7

P
2. Alibaba Group Holding Ltd 15.7

S Y
3. JD.com Inc 11.5

N COP
4. Pinduoduo Inc 3.5

I
5. Walmart Inc 2.9

R T
6. eBay Inc 2.5

O
7. Apple Inc 2.2

F NO
8. Rakuten Group Inc 1.1
9. Coupang LLC 1.0
10. Suning.com Co Ltd 0.9

DO
11. MercadoLibre SRL 0.8
12. Vipshop Holdings Ltd 0.7
13. Naver Corp 0.7
14. Sea Ltd 0.7
15. Shinsegae Co Ltd 0.7
16. Softbank Corp 0.6
17. Target Corp 0.6
18. Best Buy Co Inc 0.6
19. Home Depot Inc 0.5
20. Kroger Co 0.5

Source: Euromonitor International, data retrieved on 22 July 2022.

88
The Mobile Economy Latin America 2021, GSMA, https://www.gsma.com/mobileeconomy/latam/, accessed 13 September
2022.

17
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EXHIBIT 4: 2021 E-COMMERCE MARKET

BY COMPANY SHARE (CONT.)

Asia Pacific Retail Value: LATAM Retail Value:

USD1,493.52 bn USD 97.41 bn
Top 20 Companies breakdown Top 20 Companies breakdown
% %
1. Alibaba Group 31.7 1. MercadoLibre SRL 24.8
Holding Ltd
2. JD.com Inc 24.6 2. Americanas SA 7.1
3. Pinduoduo Inc 7.5 3. Magazine Luiza SA 6.3
4. Amazon.com Inc 3.8 4. Amazon.com Inc 4
5. Rakuten Group Inc 2.3 5. Falabella SACI 3.5

Y
6. Coupang LLC 2.1 6. Sea Ltd 3.1

L
7. Suning.com Co Ltd 2 7. Walmart Inc 2.7

N
8. Vipshop Holdings Ltd 1.6 8. Via Varejo SA 2.5

O
9. Naver Corp 1.5 9. Casino Guichard-Perrachon 2

T
SA

N S
10. Shinsegae Co Ltd 1.4 10. Alibaba Group Holding Ltd 1.9

I O O
11. Walmart Inc 1.3 11.Cencosud SA 1.6

T P
12. Softbank Corp 1.3 12. El Puerto de Liverpool SAB 1.4

C OR
de CV
13. Sea Ltd 1.3 13. Grupo Coppel SA de CV 1.4

P E
14. Tokopedia PT 0.9 14. Organización Soriana SAB 0.8

Y
de CV

S
N COP
15. Apple Inc 0.7 15. Nanjing Lingtian 0.7

I
Information
Technology Co Ltd

R T
16. SK Telecom Co Ltd 0.6 16. Rocket Internet AG 0.7

O
17. Alphabet Inc 0.4 17. Vente-privee.com SAS 0.6

F NO
18. Wemakeprice Inc 0.4 18. Ripley Corp SA 0.6
19. Beijing Xiao Mi Co 0.4 19. Fast Shop SA 0.4
Ltd

DO
20. Lotte Group 0.4 20. Grupo Elektra SAB de CV 0.3

Source: Euromonitor International, data retrieved on 22 July 2022.

18
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EXHIBIT 5: GLOBAL POPULATION OF GAME PLAYERS, 2022

(BY REGION)

L Y
O N T
I O N O S
T
C OR P
Source: “2022 Global Players Per Region With Year-on-Year Growth Rate,” New Zoo,

E
https://newzoo.com/wp-content/uploads/2016/03/Global-Players-per-Region.png, accessed 15

P
October 2022.

S
N COP Y
I
R T
O
F NO
DO

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EXHIBIT 6: THE GLOBAL GAMING (CONSOLE, PC, AND MOBILE) MARKET

Top 10 Global Markets: Revenue & Players (2022)

Ranking Market Revenue in USD bn* Players in mn
1 China 50.10 742.19
2 United States 47.62 197.16
3 Japan 22.01 78.10
4 South Korea 8.48 33.80
5 Germany 6.84 49.76
6 United Kingdom 5.73 39.10
7 France 4.27 39.34

Y
8 Canada 3.64 21.91

L
9 Italy 3.12 37.64

N
10 Brazil 2.68 100.70

O T
*Ranked according to their revenue estimates for 2022.

O N O S
Source: “Top 10 Countries/Markets by Game Revenues,” New Zoo,

I P
https://newzoo.com/insights/rankings/top-10-countries-by-game-revenues, accessed 4 September

T
2022.

E C OR
S P Y
I N COP
O R T
F NO
DO

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22/741C Sea Limited: Sustain or Expand?

EXHIBIT 7: GLOBAL GAMING (CONSOLE, PC, AND MOBILE) MARKET

Top 10 Public Companies by Global Revenues

(2020 & 2021)
Rank Company Annual Revenue in USD bn YoY change
2020 2021 %
1 Tencent 29.3 32.2 9.9
2 Sony 18.6 18.2 -2.3
3 Apple 13.0 15.3 17.7
4 Microsoft 11.8 12.9 9.6
5 Google 9.1 11.0 20.8
6 NetEase 8.4 9.6 15.0

L Y
7 Activision Blizzard 7.4 8.1 10.1

N
8 Nintendo 8.0 8.1 1.9

O
9 Electronic Arts 5.7 6.5 14.9

T
Sea Limited

S
10 2.0 4.3 114.3

I O N O
P
Source: Jeffrey Rousseau, “Report: Top 10 companies made 65 percent of global games market

T
in 2021,” Games Industry.Biz, 12 May 2022, https://www.gamesindustry.biz/report-top-10-

C OR
companies-made-65-percent-of-global-games-market-in-2021, accessed 4 September 2022.

P E Y
I S
N COP
O R T
F NO
DO

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EXHIBIT 8: TOP-10 MOBILE GAMES (JANUARY 2022)

By Worldwide Downloads and Revenue

By Worldwide Downloads
Overall Downloads APP Store Downloads Google Play Downloads
1 Garena Free Fire Subway Surfers Garena Free Fire
2 Subway Surfers Coloring Match Subway Surfers
3 Roblox PUBG Mobile Ludo King
4 Candy Crush Saga Count Masters Race Master 3D
5 Race Master 3D Roblox Candy Crush Saga
6 Ludo King Slap and Run Roblox
7 PUBG Mobile Honor of Kings Brain Story

Y
8 Count Masters Call of Duty: Mobile Sponge Art

L
9 Sponge Art Magic Tiles 3 Piano Fire

N
10 Magic Tiles 3 Genshin Impact Paper Fold

N O S T
Source: “Top Mobile Games by Worldwide Downloads for January 2022,” Sensor Tower,

I O O
https://sensortower.com/blog/top-mobile-games-worldwide-january-2022-by-downloads/,

T P
accessed 4 September 2022.

E C OR
P
By Worldwide Revenue

S Y
Overall Downloads APP Store Downloads Google Play Downloads

I N COP
1 PUBG Mobile Honor of Kings Coin Master
2 Honor of Kings PUBG Mobile Candy Crush Saga

R T
3 Genshin Impact Genshin Impact Lineage W

O
F NO
4 Candy Crush Saga Roblox Genshin Impact
5 Roblox Three Kingdom Tactics Roblox
6 Coin Masters Fantasy Westward Journey Garena FreeFire

DO
7 Three Kingdom Tactics Candy Crush Saga PUBG Mobile
8 Lineage W League of Legends: Wild Rift Pokémon GO
9 Garena FreeFire Monster Strike Evony
10 Uma Musume Pretty Derby Uma Musume Pretty Derby Clash of Clans

Source: “Top Mobile Games by Worldwide Revenue for January 2022,” Sensor Tower,
https://sensortower.com/blog/top-mobile-games-by-worldwide-revenue-january-2022/, accessed 4
September 2022.

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EXHIBIT 9: SEA LIMITED HISTORICAL SHARE PRICE

(1 NOVEMBER 2017–31 AUGUST 2022)

L Y
O N T
I O N O S
T
C OR P
P E Y
I S
N COP
O R T
F NO
DO
Source: Sea Limited, Yahoo! Finance, accessed 16 September 2022.

23
22/741C Sea Limited: Sustain or Expand?

EXHIBIT 10: SEA LIMITED FINANCIAL PERFORMANCE

FY 2017–FY 2021

in USD bn FY 2017 FY 2018 FY2019 FY2020 FY2021

Garena Digital Entertainment
Revenue 0.496 0.661 1.8 2.0 4.3
EBITDA 0.175 0.263 1.0 2.0 2.8
Shopee E-Commerce
Revenue 0.018 0.291 0.942 2.2 5.1
EBITDA (0.444) (0.860) (1.0) (1.3) (2.6)
SeaMoney Digital Financial Services
Revenue / / / / 0.470

Y
EBITDA / / / / (0.617)

L
Group Revenue 0.554 1.049 2.9 4.4 10

N
Group EBITDA (0.332) (0.694) (0.179) 0.107 (0.594)

N O S T
Source: Sea Limited, December Quarter and Full Year Results 2017, 2018, 2019, 2020, and 2021,

O O
https://www.sea.com/investor/quarterlyresults, accessed 6 September 2022.

T I P
E C OR
S P Y
I N COP
O R T
F NO
DO

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EXHIBIT 11: 10 MOST-DOWNLOADED SHOPPING APPS IN 2021

10 Most-Downloaded Shopping Apps in 2021 (in millions)

Ranking Worldwide Europe United States Latin America Southeast Asia

1 Shopee Vinted Amazon Shopee Shopee
211 26.9 41 118 67
2 SHEIN SHEIN SHEIN SHEIN Lazada
193 23.9 32.3 53.4 65.6
3 Meesho Lidi Plus Shop MercadoLibre Tokopedia
162 16.9 31.1 44.4 19.4
4 Amazon AliExpress Walmart AliExpress SHEIN

Y
154 12.6 28.5 25.1 14.7

L
5 Flipkart eBay OfferUp Magalu Akulaku

N
96.9 12.4 17.6 22.7 11.7

O T
6 AliExpress Amazon Nike Americanas Alibaba
86 12 17.4 22.7 8.2 mn

N O S
7 Wish Zalando Fetch Facily ShopBack

I O P
72.9 11.4 Rewards 17.7 6.9

T
16.5

C OR
8 Pinduoduo Klarna eBay Amazon Indomaret

E
70.9 10 16.3 16.1 Poinku

P
5.9

S Y
9 Lazada Wish Klarna enjoei Wish

N COP
69.2 9.6 14.5 13.7 4.6

I
10 Alibaba Shop Wish Casas Bahia JD.com

R T
63.1 9.4 14.3 13.1 4.3

O
F NO
Source: Benchmarking the Global Mobile Retailing Landscape Report, Apptopia, January 2022,
https://engage.apptopia.com/retail-landscape-benchmark-2021, accessed 14 September 2022.

DO

25