Market will correctly value Sea’s business in long run, says CEO

THE chief executive of one of South-east Asia’s largest tech companies on Friday (Oct 20) defended his decision to take the company public, amid a shake-up that has sent its shares down 87.6 per cent from their peak in October 2021.

Forrest Li, CEO and co-founder of Sea, said he has never regretted his decision to take the company public on the New York Stock Exchange.

Addressing the company’s employees in a letter on the anniversary of Sea’s initial public offering, he wrote about the benefits of being listed and said the market would eventually value the company for what it is worth.

“Let’s work on building up our company’s intrinsic value – and rest assured that the market, when it’s ready, will catch up with us,” he said in the letter, a copy of which was seen by The Business Times.

In August, the Internet group suffered a historic 29-per-cent single-day stock drop, despite having turned in its third profitable quarter in a row. The company had a market value of US$25.6 billion as at the close of trading in New York on Thursday.

Sea is facing pressures on several fronts. High inflation and rising interest rates have caused investors to avoid tech stocks. Sea’s e-commerce platform, Shopee, is under threat from the wildly popular social media app, TikTok, and faces the prospect of slowing growth.

Coupled with a gaming arm that has yet to produce another hit game, Sea has had to reckon with a stable of investors that have lost confidence in its stock.

Still, being a public company has enabled it to raise around US$10 billion and grow at an otherwise impossible speed, Li said.

He added that Sea’s journey as a young public company has provided insights that might have taken a decade or two to learn.

“Being on the market keeps us on our toes, giving us an external point of view that we can use to strengthen our own thinking. When the market’s feedback aligns with our plans, it gives us confidence. When it does not, it pushes us to think harder: is there more we need to consider?” he wrote.

Li, however, denied that the market is always right. 

“The market may not recognise what we do immediately. In the short run, it is a volatile voting machine,” he said, quoting a shareholder letter by Warren Buffett that referenced the words of investor Benjamin Graham.

“But in the long run, as a weighing scale, it will correctly value our business’ quality,” Li added.