Why Sea (SE) Shares Are Falling Today

What happened:

Shares of e-commerce and gaming company Sea (NYSE:SE) fell 8.3% in the pre-market session after Bloomberg reported that Indonesian antitrust authorities are investigating the company for “potentially unfairly favoring its own delivery service compared to other alternatives. According to concerns, Shopee’s (Sea’s e-commerce platform) algorithm tends to favor the company’s services over other options when shoppers choose how to have their purchases delivered. The antitrust agency noted that “… Shopee International Indonesia has engaged in discrimination in the selection of shipping service companies that are automatically activated in bulk on the seller dashboard.” A Shopee Indonesia spokesperson responded by stating that “the company is committed to complying with all applicable laws and legislation in the Republic of Indonesia.”

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What the market tells us:

Sea shares are quite volatile and have seen movements of more than 5% over the last year. In the context of this, today’s move indicates that the market considers this news significant, but not something that would fundamentally change its perception of the business.

The biggest move we’ve reported on over the past year occurred three months ago, when the company’s shares gained 16.6% after news of the company’s fourth-quarter results, which slightly exceeded analyst revenues and adjusted EBITDA expectations. Notably, the company announced its first full year of annual profits since its IPO. The company noted that despite growing competition in the e-commerce market in Southeast Asia, Shopee (SEA e-commerce business) is gaining market share. As a result, the company expects Shopee’s full-year GMV growth to be in the low teens and adjusted EBITDA to be positive in the second half of this year.

Despite the challenging macro environment, SeaMoney (SEA’s fintech business) reported its first year of positive profit in 2023. Finally, Sea’s gaming studio, Garena, achieved huge success with one of its published Free Fire games becoming the most downloaded mobile game according to Sensor Tower. Overall, it was a solid quarter for Sea, with improved adjusted EBITDA and profitability and a reassuring outlook.

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