What happened
Shares of Asian tech company Sea Limited (SE 0.05%) surged on Monday after new revelations regarding major competitor TikTok. In Indonesia, TikTok Shop is quickly taking over the e-commerce market. But as early as tomorrow, Indonesia may release regulations that would make it harder for a social media platform like TikTok to integrate e-commerce capabilities.
Sea has three major parts of its business, one of which is e-commerce with its Shopee platform. If growth for TikTok Shop is suddenly hampered by stricter regulations, it would be good for Shopee, in theory. And that's why Sea stock was up 12% as of 11 a.m. ET.
So what
Roughly two-thirds of Sea's revenue for the second quarter of 2023 came from its e-commerce segment. Therefore, this is clearly a huge part of the business. Getting a boost here from weakened competition in Indonesia could be a big deal.
Now what
Sea stock is down 90% from its all-time high, and expectations for the company are low right now. These low expectations are partially fueled by fears regarding competition like TikTok. Maybe expectations can now bounce back if Indonesia changes the rules of the game. Sea is still growing and profitable, which could mean that it's in a good position to bounce back as the business executes.
However, it's worth pointing out that investors don't fully know what Indonesia plans to do or the potential scope of the new regulations. Consider that Sea allows for social e-commerce features, as well, with its Shopee live streaming. And in Q2, management said that it believes it's now the largest live-streaming platform in Indonesia with Shopee.
Therefore, it's possible that new regulations in Indonesia could complicate things for Sea, as well. For this reason, investors will want to keep an eye on the practical implications of Indonesia's new rules once they come out.
