What happened
Shares of Sea Limited (SE 0.05%) are up 20% this week as of Thursday's close, according to data provided by S&P Global Market Intelligence, following news that China-based competitor TikTok Shop will face a regulatory ban on e-commerce transactions in Indonesia.
So what
Earlier this month, Sea Limited told investors it was preparing to lay off 3% of employees at its Shopee e-commerce business in Indonesia -- which stands tall as Southeast Asia's largest economy --- to curb cash burn. For perspective, Sea Limited generated roughly two-thirds of its total revenue last quarter from e-commerce transactions.
But on Monday, Sea Limited Stock rallied more than 12% amid reports that government officials in Indonesia were considering new regulations to restrict social media platforms from integrating e-commerce capabilities. The move would undoubtedly hamper up-and-coming e-commerce competitors like TikTok Shop.
Sure enough, Sea Limited stock extended its gains on Wednesday when Indonesia confirmed as much, announcing a ban on e-commerce transactions on social media platforms in the country effective immediately.
Trade Minister Zulkifli Hasan told reporters that the regulation was aimed at protecting offline merchants and marketplaces by ensuring "fair and just" competition, particularly as predatory pricing on social media threatens small and medium-sized enterprises.
Now what
Sea Limited didn't immediately comment on the news. But in a statement Thursday morning, TikTok Indonesia said it "deeply regret[s] the government's announcement, especially how it will impact the livelihoods of the six million sellers and nearly seven million affiliate creators who use TikTok Shop."
Nonetheless, TikTok vowed to "take a constructive path forward" as it works to adhere to the country's new laws and regulations.
In the meantime, with shares of Sea Limited still down more than 50% from their May 2023 highs, it's no surprise to see the stock rebounding this week.
