SE ADS Offering

Hey Everyone. Sea Limited is offering an ADS for 11M shares at a price currently lower than it closed for yesterday. See article……

Given it closed at close to $199, and the price offering is $195…and there is now a dilution of shares, does this constitute a “story change”?

I’m leaning towards doing nothing at the moment, I believe in the company and the growth and think this could fuel that growth. Now I’d expect a short term impact, perhaps until the net quarterly earnings or more.

What are your thoughts?

Thanks from a fairly new board member.


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Hi Fisher,

While this certainly represents dilution, an offering is very common in high growth companies. This does not change my thesis.


Given it closed at close to $199, and the price offering is $195…and there is now a dilution of shares, does this constitute a “story change”?

I only consider “story changes” to relate to the company, with respect to what the company and its leaders do and how well they do that. In that context, the most important thing here is to understand why they’re raising money. It’s in the third bullet of the very brief link in your post:

Net proceeds will be used for business expansion and other general corporate purposes.

‘Business expansion’ is good, but ‘other corporate purposes’ is vague. For example, if it’s to pay down debt and the company is not yet profitable, maybe not so good. Note also that the article has been revised since the OP due to high demand, and the offering went through at 13.2M shares. As far as dilution goes, with about 494M shares outstanding as of 10/31/20, this one doesn’t look problematic to me. I think you’re taking the right approach.

-n8 (no position)


Hi Fisher -

It’s about a 2% dilution of shares, priced near the all time high for the stock. I don’t think the story has changed so much as there is a need for ready cash to fund further expansion.

Just my casual observation.

Full Disclosure - SE is 5.2% position in my portfolio.

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SE just won a license to open a digital full bank in Singapore, that will allow expansion into financial services. Under criteria set by the Monetary Authority of Singapore, digital full banks are required to have total capital of at least S$1.5 billion ($1.1 billion), with S$15 million at entry and progressively increasing the capital.

SE was awarded as a Digital Full Bank (DFB) whereas Ant was awarded a lessor (I think) Digital Wholesale Bank (DWB). Here is the definition:

The digital bank licences will allow entities, including non-bank players, to conduct digital banking businesses in Singapore. These new digital bank licences mark the new chapter in Singapore’s banking liberalisation journey, and ensure that Singapore’s banking sector continues to be resilient, competitive and vibrant.

A DFB will be allowed to take deposits from and provide banking services to retail and non-retail customer segments.
A DWB will be allowed to take deposits from and provide banking services to SMEs and other non-retail customer segments.</i)…

It is not clear to me how much SE can invest of the new money versus must keep as a capital foundation as a Singapore DFB. But this secondary offering is not all about dilution and should be seen as a big step up for their ecommerce business and Sea Money segment.

I see this actually as a big driver going forward for SE which will eventually realize similar fintech rewards such as MELI has. SE Asians mostly do not have bank accounts or credit cards. It is a cash world their and ripe for digital banking.

SE was my largest position (in at ~$70/share) this year even over SHOP and ZM (but which were smaller investments). But now SE has dropped to my second largest position because the other big bet I made, ROKU, has popped so much recently. I think SE and ROKU are still in he early innings and often overlooked on Saul’s board. Too many grasshoppers following Saul’s moves and not his incredible strategies.



Sorry I screwed up my HTML in my post. After the link in my post, those are my words.


If interested, here is a recent article in Sea Ltd history:

How Sea’s Garena Fuels Shopee And SeaMoney…



A little from “ How Sea’s Garena Fuels Shopee And SeaMoney”.

Revenue from Garena exploded in 2019, growing by more than 145% in one year. Most of the growth is related to the efforts of Garena in e-sports and the fact that Free Fire became the most downloaded game in the world.
You see that there is already $724M that Garena has generated in something that we could name adjusted free cash flow. And that is just for the first nine months of this year. That means that if you add Q4, this adjusted FCF will probably have grown by more than 1,000%. All this money can be used to fund the hyperbolic growth of Shopee and the starting growth of SeaMoney.

Garena, as the oldest of the three divisions of Sea, is the cash cow that fuels the growth of the two other branches. If you look at the numbers, you see that Sea has achieved something special in 2020 with Garena: in the three quarters up to now, it has spent less on marketing and sales than last year, but the percentage of paying users keeps going up and so the margins are higher.
Garena will probably have around $1B in free cash flow that it will be able to use to fuel the growth in Shopee and SeaMoney

A littles ok; but, I save a lot of this article to my permanent file earlier this morning.