In late 2021, Sea Limited (NYSE: SE)was worth almost $200 billion. Its shares had soared above $350 as investors bet that the Singapore-based company could dominate online shopping across southeast Asia and beyond. Within a year, more than 80% of its stock market value had vanished. The extraordinary rise and fall of Sea is also the story of how a computer game helped build a shopping empire.
Sea Limited began in 2009, when entrepreneur Forrest Li founded Garena to distribute computer games across southeast Asia. Few households had reliable broadband or personal computers, so Garena built relationships with cybercafes, installing its software on thousands of machines and giving customers access to popular online games.
The approach reflected Li’s understanding of the region. Southeast Asia has hundreds of millions of consumers, but its geography, languages and uneven infrastructure make it difficult for businesses to operate across national borders. Garena succeeded by finding ways around these obstacles.
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Li soon recognised a much larger opportunity in online shopping. In 2015, he launched Shopee, a website and app where independent sellers offer clothing, cosmetics, household goods and much more. Shopee initially concentrated on small sellers offering inexpensive everyday goods. Customers could chat directly with merchants, while promotions, games and rewards encouraged them to return. The approach proved popular, but attracting buyers and building the delivery infrastructure to serve them required enormous investment. Fortunately, Garena was about to produce a remarkable success. In 2017, it released Free Fire, a game designed to work on inexpensive smartphones and unreliable internet connections. It became hugely popular, eventually attracting more than 100 million daily players. The game was free, but players could buy virtual items. These generated substantial profits without the costs associated with producing and distributing physical goods. Free Fire gave Sea a valuable source of cash to invest in Shopee.
Ups and downs for Sea Limited
Then came the Covid pandemic. Lockdowns encouraged people to spend more time playing computer games and shopping online. Both businesses benefited enormously. Low interest rates encouraged investors to finance fast-growing tech companies, even when they were losing money.
Sea seized the opportunity. Shopee subsidised deliveries, offered incentives to merchants and spent heavily on advertising. It expanded into India, Europe and Latin America, while building its own delivery network. It raised billions from investors, including almost $6 billion through a share and bond issue in 2021. Flush with cash, Sea could pursue growth without worrying too much about profitability. By late 2021, investors expected Shopee to become dominant. Yet it all depended on access to funding and profits from gaming.
The reversal was brutal. As inflation surged in 2022, interest rates went up and investors became less willing to finance loss-making businesses. Gaming declined as pandemic restrictions ended. Worse, India banned Free Fire on national-security grounds, removing one of the game’s largest markets.
Sea Limited faced weaker gaming profits, heavy losses from Shopee and a collapse in investor confidence. Spending heavily today in pursuit of profits tomorrow was no longer sustainable. Li responded decisively. Shopee abandoned much of its international expansion, thousands of jobs were cut, spending was reduced and subsidies scaled back. Sea concentrated on making its remaining operations profitable.
It worked. Sea reported its first quarterly net profit in early 2023. The turnaround was striking because Shopee had depended on large subsidies to attract buyers and merchants. The retreat exposed mistakes made during the pandemic, particularly entering markets where Shopee had little established advantage. Nevertheless, Li showed he was willing to abandon unsuccessful investments rather than throw good money after bad.
Sea is a different beast now
Today, Sea Limited is a different business. In 2025, group revenue rose 36% to $22.9 billion; net profit hit $1.6 billion. Shopee handled $127.4 billion of merchandise, nearly 27% more than the previous year. Its scale creates opportunities to raise earnings without repeating the mistake of the spending spree of the pandemic years. Merchants can pay to advertise their products on Shopee, while greater delivery volumes should help spread the costs of its logistics network. Both could allow profits to grow faster than sales. Online shopping still has room to expand across the region and Shopee’s delivery network may be difficult for smaller rivals to match.
(Image credit: Future)
Sea’s third business, Monee, grew from a payments service launched in 2014 to help gamers without bank accounts buy digital products. It now provides loans and other financial services to consumers and small businesses. Shopee knows how much its merchants sell and how regularly customers make purchases. That information could help Monee assess borrowers whom conventional banks struggle to serve.
There are risks. TikTok Shop and Lazada compete fiercely, while lending exposes Monee to borrowers who may fail to repay. Garena also remains heavily dependent on Free Fire, whose popularity cannot be guaranteed indefinitely. Nevertheless, Li has proved adaptable and built substantial businesses in markets that still have room to develop. The attraction now is that Sea may be able to earn much more from the customers and infrastructure it already has. If Li can maintain that discipline, Sea could enjoy years of profitable growth.
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