What happened
Shares of Sea Limited (SE 0.05%) were soaring 8.6% on Friday morning, a day after Reuters reported the Singapore government asked India if the tech company's online game Free Fire was unintentionally included in the country's crackdown on Chinese-owned technology. Sea Limited calls Singapore home, not China.
Free Fire is the biggest title in Sea Limited's Garena video game segment and was the most-downloaded battle royale mobile game in 2021, according to app tracker App Annie. Concerns over Beijing collecting data from Chinese tech companies led India to ban dozens of popular apps and platforms, including TikTok and Free Fire.
Image source: Getty Images.
So what
When reports of the ban first appeared, Sea's stock cratered, wiping out $16 billion in value in the stock. Although it bounced back sharply the next day, the potential loss of the important Indian market, coupled with increased competition from rivals, hasn't let it recover.
Although Singapore is where Sea Limited is based, Chinese gaming giant Tencent (TCEHY 2.19%) owns nearly 19% of the gaming company. Even so, Sea maintains it does not store any user data in China.
Now what
Clearly the market is hoping for a resolution that allows India to save face and restores Free Fire to its good graces.
That doesn't do anything to minimize the competitive threats Sea's Garena business faces. But being allowed to still operate in India's fast-growing market, especially when many of its rivals are locked out, ought to give Sea's stock a leg up.
