Tencent COO Withdraws From Sea’s Board of Directors

On September 6, Singapore-based tech firm Sea Limited announced that Mark Ren, the chief operating officer of Tencent, had resigned from its board of directors, effective September 5. Sea added that Tencent has granted an irrevocable voting proxy with respect to all its Sea shares to the board for votes on shareholder matters.

On the evening of January 4, 2022, Tencent announced that it would convert its Class B shares in Sea into Class A shares and reduce its 14,492,751 Class A shares in the company. As a result, Tencent shareholding ratio in Sea was reduced from 21.3% to 18.7%, and its voting rights in Sea were also reduced to less than 10%.

Sea mainly operates three businesses: Shopee, a well-known e-commerce platform in Southeast Asia, Garena, a game platform, and digital finance division SeaMoney. In the past few years, due to its rapid expansion, it is often called “Little Tencent in Southeast Asia.”

The group is quite similar to Tencent in terms of its business model, and its growth is inseparable from Tencent support. In 2010, the firm’s second year, it received investment from Tencent. By the time it went public in 2017, Tencent held 39.5% of the shares in the company, the largest shareholder. Tencent also gave exclusive agency rights to its “League of Legends,” a multiplayer online battle arena (MOBA) video game, in Southeast Asia to Sea. After this, it also obtained priority distribution rights of many Tencent games in the Asian market, such as “Honor of Kings,” a mobile MOBA game, and “QQ Speed,” a kart racing game.

On August 16, Sea released its second-quarter financial report. Costs have increased compared with last year, but revenue growth has stagnated. The firm posted a bigger-than-expected operating loss of $837 million during the quarter, compared to $334 million last year and well above the figure of $600 million expected by the market. However, Sea reported goodwill impairment of $177.3 million in the quarter, mainly due to a change in the carrying amount of goodwill related to its prior acquisition, mainly driven by lower valuations amid market uncertainties.

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Its second-quarter financial report conference call showed that the number of users of its Garena game business exceeded expectations this quarter, but its revenue-generating ability declined. The growth rate of its Shopee e-commerce business slowed down and profit improvement was less than expected. Meanwhile, the firm’s SeaMoney digital finance business is growing rapidly, but its revenue is still small.