Sea Limited (SE 0.05%) is strong in gaming, e-commerce, and fintech -- not only in India but in other area where it's expanding, such as Latin America. In this Fool Live segment from "The Gaming Show," recorded on Feb. 14, Motley Fool contributors Jon Quast and Jose Najarro explain why investors should consider the big picture with Sea Limited stock.
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Jon Quast: It's interesting today as we already mentioned, the stock down something like 16 percent as we're coming on here. The news here today is that, it is actually being banned in India, their gaming platform, or specifically their mobile game, Free Fire. According to the company, this was from their most recent Quarterly Earnings Conference Call, they said that Free Fire was the top grossing mobile game in India. This is a very popular game. It's actually the top-grossing mobile game in a lot of areas, Latin America included, but specifically in India, it's top-grossing game.
India's Ministry of Home Affairs is recommending to ban 54 Chinese apps. Now it has already banned many Chinese apps including TikTok. What's ironic here is that Sea Limited is not a Chinese company. They are actually out of Singapore, but they're getting lumped in here with the rest of these Chinese apps, because Tencent, this is probably why, Tencent is a large stakeholder of this business and Tencent is the Chinese conglomerate here. I don't know, Jose, I think that you follow this company more than Clay or I, what are some thoughts here?
Jose Najarro: Let me just start off. Free Fire has definitely been super strong in India, I was just taking a quick look at their infographics. For four consecutive quarter, it has been the number 1 game in India, so that's some strong growth there. One of the trending articles today is one by Danny Vena. He talks a little bit about it. One thing he mentions here, and I have done some back research, is that right now, Sea Limited's Free Fire, even though obviously India has a huge population, when you take a whole look at all their e-commerce, all their other gaming revenue, it's still less. I think he said it's less than five percent, I believe it's less than 10 percent of total revenue. The stock price to drop down 15,17 percent as it is now, might seem like an overreaction.
I do believe another aspect that's happening here is Sea Limited, mainly for Free Fire Garena, but they also do have their e-commerce on Shopee on India. I wonder if some investors are fearful that, hey, they're expanding right now, the gaming aspect, what's preventing them from later on maybe banning the e-commerce aspect? I do want to say maybe that's a whole different tricky situation where a game is more of some form of digital asset, so it might be easier to shut down, e-commerce, I don't know what maybe distribution centers they might have in India and stuff like that, so that might make it a little bit more difficult to do something like that. But I guess, investors are worried about that right now.
At the end of the day, Sea Limited has been all over the place. Right now, Tencent, like you mentioned, Jon, is a major shareholder, but they started to sell off a position. Originally they were over 20 percent owners of this company. In January, they started to divest. I don't think there was the reason for them diluting their shares or selling their shares. But as a Sea holder investor, I was happy because I do believe to some extent, Tencent gives them or is holding them back because of international tensions like we see today.
For example, if Tencent wasn't part of Sea Limited, we probably wouldn't have seen the actions that we're seeing right now. At the end of the day, as an investor, I'm not worried. I also was one of the lucky few, my first initials was around the $78. I've seen the price action a little bit up, so maybe I'm a little bit bias for my early entry position. But at the end of the day, Sea Limited is strong in gaming, strong in e-commerce, strong in FinTech, not only just in India, they're expanding in South America. They're recently expanding in numerous countries in Europe. Obviously sucks. I don't know if this reaction is the correct reaction that we should be seeing.
