Following my call to short Sea back on 24th Oct (the week of the exact peak), I am following through with another short call. Yes, sounds ridiculous I know. After falling off the cliff, won’t sea finally had enough drop?
No.
The reasons are more fundamental than technical this time. Looking through the financials, I can see very clearly the heavy costs that are not easily shed in the company’s operations. Specifically, their headcounts. Being in Singapore and knowing people who joined Sea, it is obvious that the company does not have financial discipline when it comes to hiring. The company, alongside other tech start ups, grossly over-inflated the salaries of their hires. Over the years, the advertisements using expensive celebrities needlessly by shopee also made it obvious that they had gotten into the culture of burning cash mindlessly. The past decade had been friendly to those without financial discipline, the next decade will not be so. Sea’s operating costs is only going to rise and they can’t keep burning cash to capture market share. Unfortunately, the platform is not one where loyalty counts, it is one where people only use if it’s the cheapest.
Take a look at sea financial statements and see how non-sensical it is. Record revenue, record profit margin, and… record LOSS! The golden era of cheap money is over. And so is Sea. The stock falling below $30 will not be unexpected. Don’t say I never warn you.
No.
The reasons are more fundamental than technical this time. Looking through the financials, I can see very clearly the heavy costs that are not easily shed in the company’s operations. Specifically, their headcounts. Being in Singapore and knowing people who joined Sea, it is obvious that the company does not have financial discipline when it comes to hiring. The company, alongside other tech start ups, grossly over-inflated the salaries of their hires. Over the years, the advertisements using expensive celebrities needlessly by shopee also made it obvious that they had gotten into the culture of burning cash mindlessly. The past decade had been friendly to those without financial discipline, the next decade will not be so. Sea’s operating costs is only going to rise and they can’t keep burning cash to capture market share. Unfortunately, the platform is not one where loyalty counts, it is one where people only use if it’s the cheapest.
Take a look at sea financial statements and see how non-sensical it is. Record revenue, record profit margin, and… record LOSS! The golden era of cheap money is over. And so is Sea. The stock falling below $30 will not be unexpected. Don’t say I never warn you.
