TikTok Shop takes a bite out of Sea

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Hello reader,

When TikTok is spotted in the waters, a lot of companies, institutions, and even governments start acting like sharks are circling them and there’s blood in the water.

Whether it’s security concerns in the US or the outright ban in India, the Chinese social media app inspires fear wherever it goes. 

Maybe TikTok should also have an ominous soundtrack like the infamous “dum, dum” theme from *Jaws*.

In Southeast Asia, TikTok is causing alarm not over data collection or even spying, but from its entry into the world of ecommerce.

TikTok Shop is growing in several markets and initiatives like the ominously titled “Project S” have politicians concerned for the future of small businesses.

So far, we’ve largely been talking about imagined fears. Sea Group (SE, NYSE) may have actually suffered a bite from the TikTok shark - and is going to need a bigger boat.

After the tech conglomerate missed analysts' estimates for its revenue in the second quarter of this year, its value plunged 29% - the biggest daily drop since it listed in 2017.

In today’s Big Story, my colleague Simon dives into Sea’s Q2 2023 earnings and investors’ fears that its ecommerce unit Shopee is in for a bloody struggle with TikTok Shop.

- Peter Cowan

THE BIG STORY

Why Sea’s shares plunged while GoTo’s avoided the carnage

The pessimism came despite Sea reporting net income that exceeded expectations. 

3 Trends to keep an eye on

Hot stocks, earnings reports, restructuring, pressure from activist investors, and more.

1️⃣ More haste, less fast: Vietnamese electric-vehicle startup VinFast (VFS, NDAQ) made its debut on the Nasdaq last Tuesday, with its shares initially soaring 255%.

The company went public in the form of a merger with Black Spade Acquisition, a Hong Kong-based special purpose acquisition company, after what it would be charitable to call a turbulent expansion to the US.

The price surge meant at one point, VinFast had a market cap of US$85 billion, making it more valuable than BMW, Ford, and General Motors. But on Wednesday, the price later fell back considerably and continued dropping on Thursday.

2️⃣ Going to profit?: GoTo Group (GOTO, IDX) announced its second quarter financial performance last week and while the Indonesian tech giant recorded losses of US$216 million in the period, it moved closer to its profitability target for the year.

The group aims to achieve positive quarterly adjusted EBITDA in Q4 2023, and a year-on-year revenue bump of 87% to US$232 million should go some way toward that.

In an earnings call, CEO Patrick Walujo confirmed that the group is exiting the entertainment segment in what appears to be part of a wider strategy to be “extremely disciplined” about costs.

3️⃣ Abrupt U-turn: Just six months after her controversial appointment as Grab’s (GRAB, NDAQ) head of public affairs and policy in Singapore, politician Tin Pei Ling has left the firm altogether.

Tin is an elected member of the city-state’s parliament and her assuming a policy role in February elicited a strident debate before she was swiftly moved into a corporate development position. She's leaving the firm to take a leadership role in strategic partnerships and business development at an as-yet-unnamed fintech company.

Also last week, Singapore’s competition watchdog announced that it is seeking feedback on Grab’s acquisition of Singapore taxi firm Trans-cab.

2 Eye-popping facts

Tech in Asia scours the internet to bring you head-turning numbers from the world of business.

• - 99%: The plunge in WeWork’s (WE, NYSE) value from a peak of US$47 billion in January 2019 to now less than US$340 million as a result of the SPAC merger frenzy. The coworking space provider now stands on the brink of insolvency and is perhaps the poster child for everything wrong with tech unicorns.
• 3 billion: How many cups of coffee people around the world drink every day. That figure is on pace to double by 2050, but the ravages of climate change are already pummeling farming yields. I’m more of a tea man myself, but those of you who can’t start the day without a latte face an uncertain future.

The one you didn't see coming

We spotlight the story that had everyone talking and social media buzzing during the past week.

Sinocism?: Ray Dalio’s Bridgewater Associates has offloaded almost a third of its investments in Chinese stocks during the last quarter.

The world’s biggest hedge fund appears to be spooked by underwhelming markets and heightened geopolitical tensions between the US and China, exiting stakes in 13 US-listed Chinese companies.

Dalio, previously very bullish on China, had warned in a LinkedIn post last April that relations between the two superpowers were getting so bad that doing business with a Chinese firm could become as toxic as working with a Russian company in the US.

The American billionaire is unlikely to have made the decision to pull out of China on his own, as he’s known for “the importance of a meritocracy of ideas.” At least that’s what Singaporean presidential candidate Ng Kok Song told *Tech in Asia* in a recent interview.

That’s it for this edition – we hope you liked it!

Happy investing and see you next week!

Disclaimer: This content is for informational purposes only. Kindly do not construe any such information as legal, tax, investment, financial, or other advice.