What happened
Sea Limited (SE 1.20%) was cruising nicely above the waves at the start of the trading week. The Singapore-based specialty tech company's shares closed Monday nearly 5% higher, as investors welcomed an analyst's positive take on their company retreating from some tough markets.
So what
That report was published by Reuters, which on Friday morning wrote that Sea's e-commerce operation Shopee will sharply curtail its activities in several major Latin American markets. Citing "people close to the matter," the news agency said that Shopee is to shut local operations in Mexico, Colombia, and Chile, and will fully exit Argentina. Additionally, Sea's gaming division Garena is to lay off hundreds of workers in Shanghai.
Reuters quoted an internal company email it had seen, authored by Shopee Chief Executive Chris Feng, which stated that "in light of the current elevated macro uncertainty," it is necessary for the company to "focus resources on core operations."
One prominent Sea observer, Morgan Stanley analyst Mark Goodridge, reiterated his bullish view on the company's stock late Friday.
In a new research note, he said he's keeping his overweight (read: buy) recommendation on the stock and his $123 per share price target. Goodridge pointed out that the gross merchandise value of the four countries only amounts to a roughly 3% market share. He estimated that the withdrawal from those markets could save Sea around $180 million in expenses.
Now what
While it's never particularly heartening to hear about a company's retreat from a big region in the world, Sea continues to struggle, so perhaps retreat and consolidation is an appropriate strategy just now. Investors certainly like the idea of the company reducing its global footprint, at least for now.
