This article was originally published on Momentum Works Intelligence. For a deeper read on how businesses in Asia operate, compete and grow, visit Momentum Works Intelligence for more analysis across commerce, logistics, food delivery, AI and robotics.
Sea Limited’s shares fell 9.09% on Tuesday, following the release of a letter from founder Forrest Li marking the 9th anniversary of the company’s NYSE listing.
The letter contained two significant announcements: a potential IPO for fintech arm Monee, and the launch of a new AI cloud business: Sea Cloud. Analysts largely maintained their bullish ratings. The market had other ideas.
We will come back with a deeper analysis – particularly of Sea Cloud – in the coming days on Momentum Works Intelligence. But here are some quick thoughts:
- Monee’s potential IPO is not particularly surprising. The business has grown significantly in recent years in both scale and profit. In particular, the launch of independent apps in Indonesia and Brazil, as well as tapping into the merchants off Shopee platform, makes the business more attractive standalone;
- This makes the Monee IPO more attractive than Alibaba’s attempted listings for its infrastructure subsidiaries earlier in 2023. The question here is then can Shopee itself be very profitable standalone without Monee?
- Sea Cloud is the more interesting announcement for sure. Forrest says Sea has operated its own cloud infrastructure for over a decade, supporting Garena, Shopee and Monee – i.e. not starting from scratch. This is true;
- Also, this is not the first time Sea plans to offer cloud. Of course with the AI super cycle and the recent joint announcements with Nvidia, the value proposition now becomes significantly more interesting compared to Sea’s previous cloud attempts;
- Sea now plans to offer cloud capabilities to external enterprise customers. Who would be the enterprise customers and how would Sea be competitive in that business?
- Part of the answer may lie in Sea’s unusual positioning: a Singapore-headquartered company whose management team has deep familiarity with China. That positioning could be particularly interesting in AI infrastructure. We will dive into that point more in our upcoming MWI analysis;
- AI infrastructure could require another substantial investment cycle, with uncertain returns – investors have already cast their doubt in the shares of CoreWeave. Sea’s letter (filed with SEC here) offered little detail on future capital expenditure. Then again, it was written as an anniversary note to employees, not an investor presentation 🙂
