Shares of Sea Limited (SE 0.03%) are tumbling 13% this week compared to where they closed last Friday, according to data by S&P Global Market Intelligence, after the online gaming platform's top game, Free Fire, was reportedly banned in India for security concerns, along with dozens of other apps.
The news caused Sea Limited to lose $16 billion in market value in one day, though it bounced sharply higher the next day as investors thought the massive sell-off was overdone. Included in those buyers was investing guru Cathie Wood, whose ARK Invest exchange-traded funds have been steadily accumulating shares of the gamer.
Sea Limited's Free Fire was launched in 2017 and quickly became the most-downloaded battle royale mobile game in 2021, according to app tracker App Annie.
However, rising tensions between India and China have caused India to begin banning apps that it contends jeopardize the privacy and security of users because the data collected by them is stored in China.
According to Reuters, a government source said such data collection would allow the data to be potentially mined and analyzed by "elements hostile to the sovereignty and integrity of India and for activities detrimental to national security."
To date, some 321 apps have been blacklisted, including TikTok, the most popular app globally. Free Fire is the biggest game of Sea Limited, which is based in Singapore. Chinese gaming giant Tencent (TCEHY 3.86%) owns a near-19% stake in Sea, though it contends it does not store any user data in China.
After Sea Limited's stock hit an all-time high of $372 last October, shares have plunged 63% as the markets turned away from previous high-flying tech stocks and those that benefited from pandemic-related tailwinds. Gaming stocks got a big lift during the pandemic as gamers locked down in their homes turned to gaming to pass away the idle hours.
Yet Sea Limited also faces increased competition from Alibaba Group Holding (BABA 4.98%) and others, leading to slowing growth. There's also now fear that India might ban Sea's other app, Shopee, a thriving e-commerce site that is the No. 1 retail app in Southeast Asia, according to the website Apptopia. Sea also operates digital financial services with SeaMoney, which had 39 million users at the end of the third quarter.