Sea Ltd.—controlled by billionaire Forrest Li—sank deeper into the red in the first quarter as losses at its e-commerce platform Shopee widened and expenses surged.
The Singapore-based e-commerce and gaming giant reported on Tuesday that its net loss in the first quarter ended March widened to $580 million from $422 million. While overall revenue climbed 64% to $2.9 billion, the company’s operating expenses surged 68% to $1.7 billion due largely to higher marketing costs as well as research and development expenditures, the company said in a statement.
The widening losses come as Sea consolidates its e-commerce operations following an aggressive global expansion drive in recent years. In March, Sea pulled out of India and France to focus on key markets in Brazil, Southeast Asia and Taiwan. While e-commerce revenue climbed 64% to $1.5 billion compared to the previous year, Shopee’s operating losses increased 77% to $810.6 million.
“In the past two years, we successfully navigated the major uncertainties brought by the pandemic to capture the significant growth opportunities presented to us across all businesses,” Li said in a statement. “As we enter a new period, we recognize that the current macro trends and uncertainties could affect our region and the world in the near to mid-term.”
As the Russian invasion of Ukraine, rising interest rates and surging commodity prices dampening the global economic outlook, consumers who are returning to their offices following the pandemic lockdowns in the past two years are starting to cut back on online purchases.
While revenue from digital entertainment—Sea’s most profitable business—improved 45% to $1.1 billion in the first quarter from the previous year, bookings slipped 26% to $800 million. Active users of its gaming platform fell 5% to 615.9 million after India banned its flagship mobile game Free Fire in February.
The India ban along with Chinese tech giant Tencent reducing its stake in the company triggered a selloff in Sea’s share price, which has slumped nearly 80% from an all-time high of $366.99 a share seen in October. The stock has rallied since its market debut on the New York Stock Exchange in 2017, with the gains accelerating during the pandemic when demand for Sea’s online gaming, e-commerce and payments businesses increased until Tencent started selling Sea shares.
The retreat in Sea’s share price has dragged down the fortunes of the company’s three cofounders, with the real-time net worth of Sea chairman Li, 44, tumbling to $4.6 billion this week from $15.9 billion in August when the list of Singapore’s 50 Richest was published. Li cofounded Sea with Gang Ye and David Chen in 2009, the year the trio launched online gaming platform Garena. Originally from mainland China, the partners are now naturalized Singapore citizens.