Singapore Equity Issue
Singapore-based Sea’s US$989m US IPO, the biggest overseas listing on record from a South-East Asian company, put the region’s internet sector firmly on the radar for global investors.
The October IPO hinged on convincing investors to look beyond the established Chinese technology industry and put their money on a lesser-known region. Sea is also not yet profitable, and its founder Forrest Li controls an outsized share of the voting rights through a dual-class share structure.
Smart timing and a concerted marketing effort paid off, and Sea ended up adding an enviable list of international investors to its already impressive shareholder register. The deal was covered within the first day of bookbuilding, and was eventually closed a day early on runaway demand, allowing Sea to increase both the size and the price – a rare feat in any market.
The IPO priced at US$15 a share, versus the US$12–$14 original price range, and was upsized to 58.96m shares from 49.69m. The underwriters subsequently exercised 6.99m of an 8.84m-share greenshoe, bringing the final proceeds to US$989m.
Over 500 accounts participated in the IPO with interest from international long-only investors. The top 20 accounts were allocated 70% of the shares.
The strength of its local partnerships helped, as did the financial backing of China’s Tencent Holdings, which had a 39.8% stake before the IPO. Other investors in the company include global names such as SeaTown Holdings, an affiliate of Temasek, Khazanah Nasional, GDP Venture, Mistletoe, General Atlantic, Ontario Teachers’ Pension Plan, Keystone Venture, and Skype co-founder Toivo Annus.
Still, Sea needed to convince investors of the potential of its three main businesses across the region, as well as its expansion into e-commerce and digital payment. Garena, established in 2009, is a well-known brand in South-East Asia, but digital payment business AirPay and Shopee launched in 2014 and 2015, respectively, are not yet household names.
It also operates across a diverse range of markets, covering Singapore, Vietnam, the Philippines, Indonesia, Thailand, Taiwan and Malaysia – a geographical cluster the company terms as Greater South-East Asia.
Sea’s e-commerce push sent it deeper into the red in the first half of 2017, as rising sales and marketing expenses drove its net loss up to US$165m from US$87m.
Ahead of the IPO, the company recorded revenue of US$195.4m in the six months to June 30, up from US$166.6m a year earlier.
Sea’s extensive marketing efforts, with a roadshow covering more than 100 investors, banished painful memories of MOL Global’s disastrous 2014 IPO – the last in the US from South-East Asia – and paves the way for others to follow.
Credit Suisse, Goldman Sachs and Morgan Stanley were the bookrunners.
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