The war of attrition continues with Shopee’s parent company losing S $ 2.1 billion


Another Godzilla movie is about to release later this month, but it looks like we’re seeing a battle between totally real monsters in the Southeast Asian e-commerce marketplace today.

The parent company of Shopee, Sea Ltd. , Recently It published its financial results for 2020 And they made an enjoyable read.

Despite what you would have thought otherwise, with all the talk raging around how the Covid-19 pandemic is raising the digital business, the numbers are not entirely clear, at least by traditional standards.

While Sea doubled its revenue, it nearly doubled its costs as well and recorded its largest ever loss of US $ 1.6 billion (SGD 2.1 billion).

However, in this completely curious reality of the world of IT startups, 2020 can be considered an exceptionally good year.

Be opposite Lazada

The company’s stock has continued to rise, with its market value approaching $ 120 billion today (it briefly exceeded $ 140 billion in February) – up from about $ 25 billion this time last year, and just $ 5 billion in 2019 year.

In other words, the $ 1,000 investment in Sea at the start of 2019 is roughly $ 24,000 today – all while the company continues to drain on money.

History of the market cap from the sea
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Its high valuation allowed it to raise capital in the stock market, with A. $ 2.6 billion issued in DecemberProviding the necessary funds for enforcement in 2021 to reach the company’s stated goal of doubling e-commerce revenues (as it did in 2020).

This time, to about $ 4.5 billion, or 112 percent higher than last year, as announced in Release.

He is also seeking to use the money to expand his financial services offer, having obtained A. Digital banking license in Singapore last year.

Shopee continues its stratospheric rise, in just over five years in business, leaving Alibaba-owned Lazada in the background. But it’s pretty clear that while Rocket Internet kid might be down, it’s not out yet.

With the appointment of a new CEO in 2020, and the deep pockets provided by the Chinese parent company, the war is likely to intensify.

While Lazada doesn’t publish separate results since its acquisition in 2016, it is quite certain that it is also bleeding in an effort to keep up with its main competitor.

In one corner of the ring we have the current market leader who is able to raise big money thanks to his high market capitalization.

On the flip side, we have a competitor backed by a money-making Chinese giant, seeking control of its geographic backyard.

As a result, neither of them is currently in danger of losing strength.

Their battle is about long-term dominance across a growing market of more than 600 million increasingly wealthy customers, so don’t expect to drop any towels in the near future.

Challenges that a shopper has to overcome

Despite its impressive results and clearly successful management, Sea Ltd. More vulnerable to external factors.

A stock market crash could limit financing options (or make them relatively more expensive), and its current market value of $ 120 billion to $ 140 billion appears overvalued compared to $ 635 billion or even $ 1.5 trillion from Amazon on Alibaba.

Sea is valued at 8 to 10 percent of Amazon’s market value, while its revenue is just 1 percent, and roughly half of it comes from digital entertainment arm Garena.

The state of the stock market remains difficult to predict as governments around the world try to support economies through fiscal and monetary measures, which have contributed to stock price inflation.

Whether these rallies continue or face a painful correction remains to be seen and nobody guesses, because we weren’t quite in a situation like this.

Any fluctuations could harm the sea more than Alibaba, and a major economic crisis could end with giving the upper hand to Lazada.

It is also uncertain whether the pace of e-commerce growth – fueled by the pandemic in 2020 – will remain strong this year to allow Shopee to double its revenue again, Sea Ltd. In her.

Regardless of how these internal and external factors work, it seems unlikely that the stock’s value will quintuple for the third year in a row.

Sea’s market cap is a vote of confidence from investors who see its continued growth over competitors, not a reflection of current results.

What does it mean for SEA Buyers and Sellers?

Expect more aggressive ads, discounts, offers, shipping options, and lower commissions for all merchants, as both giants continue to swap beats in the years to come.

Sea has done well so far in trying to cement its position as a home brand in Southeast Asia, but for Alibaba, the dominance of the region is of strategic importance.

It is natural that the Chinese company wants to control its nearest neighborhood. It also needs clear successes that transcend national boundaries to prove to investors that it can do well globally, not only in China (which is a curse that afflicts many Chinese companies).

The Covid-19 market rally has put Sea’s market value out of any acquisition prospects and the company can get a stronger foundation on its own.

In fact, it might use its capital to acquire smaller competitors and boost its e-commerce position more quickly this way.

But if an economic crisis did happen, driving down stock prices, the tables could turn again and it might enter the radar of the wealthiest companies, just like the way Alibaba picked up Lazada in 2016. It appears that acquiring it for only $ 2 billion that year. Like a pocket change today.

For now, the two companies are expected to continue bleeding in hopes that they will be the last man standing.

In the meantime, everyone should benefit from a shopper’s paradise from discounts and other incentives, used in the hope of settling the rivalry. Enjoy it as long as it lasts – no company can lose billions every year forever.

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