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Finance

Singapore internet giant Sea to raise $2bn with new shares

Tencent-backed company eyes further expansion, including with digital banking license

Internet giant Sea announced a fresh offering of 11 million American Depositary Shares in an underwritten public offering. (Source photos by SEA and Kentaro Iwamoto)

SINGAPORE -- Singapore-based internet giant Sea on Thursday said it was pursuing "business expansion" in announcing a fresh offering of 11 million American Depositary Shares in an underwritten public offering.

At current stock prices, proceeds from the tranche would net more than $2 billion for the company, which has transcended its unicorn status to become Southeast Asia's largest listed company with a market valuation of around $100 billion.

Sea intends to grant underwriters a 30-day option to purchase up to an additional 1.65 million shares on the same terms, which could yield in excess of another $300 million for the New York Stock Exchange-listed company that is parent to regional e-commerce platform Shopee.

Besides expansion, net proceeds from the move will be used for "general corporate purposes, including potential strategic investments and acquisitions," Sea said, adding that the proposed offering has Goldman Sachs (Asia) and J.P. Morgan Securities as joint bookrunners.

Sea, which is backed by Chinese technology conglomerate Tencent Holdings, is bucking economic headwinds from the coronavirus pandemic, emerging as a beneficiary of the accelerated shift toward digitalization in Southeast Asia.

According to a digital economy report released in November by Google, Temasek Holdings and Bain & Company, the region's e-commerce market is expected to grow 63% this year to $62 billion, from last year's $38 billion, in terms of gross merchandise value.

Sea, led by billionaire entrepreneur Forrest Li, has seen its market capitalization more than quadruple from the beginning of this year, even though it reported a net loss of $425 million for the July-September quarter, wider than the $206 million in red ink a year earlier as it invested heavily in regional expansion.

The startup's gaming unit, Garena, logged a quarterly operating profit for the period of $278 million on its self-developed title "Free Fire." That is generating cash for investment in its e-commerce arm and its third pillar of business -- digital payment services.

Sea scored a coup at the beginning of this month, snagging one of the five digital banking licenses up for bids from Singapore's central bank. The permit allows it to extend its reach as a virtual financial institution that can both target retail customers and provide lending services for other businesses.

Results of the digital banking bids, which were evaluated over the year by the Monetary Authority of Singapore, were released on Friday of last week, with Sea's shares surging 8% in the U.S. market on the back of the central bank's decision in awarding the permits.

Chinese financial technology giant Ant Group and a consortium including Grab -- the Singapore-based Southeast Asian ride hailing, food delivery and cashless payment app -- and Singapore Telecommunications were among the others that bagged the licenses. Together with Sea, the tech players are expected to pioneer financial services in the digital space that competes with those of traditional lenders.

The new digital banks are expected to start services in early 2022, so it would take some time before Sea unveils the full suite of offerings for its virtual financial services arm, which could further boost overall earnings alongside its gaming, e-commerce and digital payments outfits.

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