The firm just offered the biggest equity sale of the year, but is this bad news for the stock, and should investors be overly concerned?
Sept. 9, 2021
Southeast Asia’s largest company just announced its intention to raise $6.3 billion in the largest equity offering of the year so far. The e-commerce and gaming giant, Sea Limited (NYSE: SE), hopes to raise $6.3 billion.
How much is Sea offering?
The Tencent-backed company is offering 11 million shares, worth roughly $3.8 billion, and plans to issue $2.5 billion of equity-linked debt. Sea is planning to use this money to rapidly expand its market share in its digital shopping and gaming ventures. However, as competition in the gaming and e-commerce spaces intensifies, Sea is also looking at new opportunities. The firm is also going to use the funds to boost its e-commerce efforts in Latin America and food delivery services in Southeast Asia.
Singapore’s most valuable firm has rapidly expanded its market share in both e-commerce and gaming during the pandemic when people couldn’t go to physical stores and turned to video games for entertainment. In this time, Sea had hit titles with its shooter game ‘Free Fire’ and its Shopee online shopping app.
Back in August, the company’s founder, Forrest Li, became Singapore’s richest individual when the stock surged 20% in the month. Sea is offering 11 million shares, making it the largest equity sale of 2021. Last November, Chinese e-commerce firm, Pinduodup, raised $4.1 billion.
Sea stock is falling, should I sell?
Sea stock is up 75% year-to-date but it is now down over 2% in pre-market trading after it broke the news about the offering. However, this short-term news should not affect your opinion on the stock as a long-term investment. While shareholders might not be happy with the share dilution, the massive ventures Sea is going for after will surely pay off. Latin American e-commerce, in particular, represents a huge opportunity for Sea to dominate in this up-and-coming market.
To dominate gaming, digital shopping, and food delivery services in multiple continents means Sea needs more money, it’s as simple as that. The prospect of Sea becoming a global powerhouse in these industries outweighs any concerns about short-term share price dilution and should not concern investors who are able to see the bigger picture for the stock.
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