Shares of Sea Limited (SE 1.93%) crashed and burned on Monday, plunging as much as 19.2%. As of 10:40 a.m. ET, the stock was down 18.8%.
The catalyst that sent the tech giant careening lower was a report that the world's second most populous country has banned the company's most successful mobile game.
Free Fire, Sea Limited's most popular video game title, was included in a list of apps that have been banned by India, according to a report by Bloomberg citing "people with knowledge of the matter." India's Ministry of Electronics and Information Technology has forbidden a total of 54 apps that it says originated in China, citing security concerns.
A number of high-profile Chinese companies also had titles on that list. Alibaba (BABA 1.40%), Tencent Holdings (TCEHY 1.18%), and Netease (NTES 1.61%) all had a number of apps blacklisted, many of which were rebranded versions of games and applications that were already banned by India back in 2020. Sea Limited, which is based in Singapore, has a long-standing connection to Tencent -- which is Sea Limited's largest stakeholder, controlling roughly 19% of its stock.
This move represents a hurdle for Sea Limited, as India -- which has a population of 1.4 billion people -- has been one of the company's biggest growth areas. Free Fire, Sea Limited's marquee title, was the "highest grossing mobile game in India" during the third quarter of 2021, according to the report, citing data from app-tracking company App Annie.
Sea Limited is something of a triple threat. While the company got its start from its Garena mobile gaming segment, its Shopee e-commerce segment is currently the company's biggest revenue generator, accounting for roughly 49% of sales in the third quarter.
It's also important to note that the news isn't as bad as the stock-price decline would suggest. India represented less than 3%, or $33 million, of Sea Limited's mobile-gaming revenue, and roughly 1.2% of the company's total revenue.
This suggests that this significant sell-off is vastly overdone and represents a buying opportunity for Sea Limited investors with long-term investing time horizons.