Internet group Tencent is considering buying $100m of shares in Singapore-based online services provider Sea when the latter floats in the US, according to a regulatory filing yesterday.
Sea plans to issue approximately 49.7 million American Depositary Shares on the New York Stock Exchange priced at between $12.00 and $14.00 per share, which would raise $596m going up to $695m, if the company floats at the top of its range.
Formerly known as Garena, Sea runs a three-pronged business present in seven Southeast Asian countries that focuses on gaming and digital entertainment, digital financial services and an e-commerce marketplace.
Sea has raised about $1.05bn in funding and Tencent is a long-term investor as well as its largest shareholder, with a 39.8% stake set to be diluted to 35.3% in the IPO. It has expressed interest in buying $100m of ADS’s, but the deal has not been agreed.
Because of the different types of shares held by Sea’s investors, Tencent and Sea founder Forrest Xiaodong Li are expected to hold 74.5% of the voting power in the company once the offering has closed, even without the proposed Tencent share purchase.
Other notable investors in the company include Li’s Blue Dolphins Venture vehicle, which holds a 14.7% stake set to be diluted to 12.4%, and hedge fund sponsor Hillhouse Capital, the holder of a $230m convertible note set to be converted to a 6% stake upon completion of the IPO.
Hillhouse was a participant in Sea’s last funding round, a $550m round in May 2017 that included President International Development Corporation, a branch of food supplier Uni-President Enterprises, as well as diversified conglomerate JG Summit Holdings, Farallon Capital Management, Cathay Financial and GDP Venture.
Sea had not revealed details of its early funding, the first round it publicly disclosed being a $170m series D round led by the Malaysian state-owned Khazanah Nasional in March 2016. Temasek, GDP and Mistletoe invested an undisclosed amount in Sea six months later.
The IPO’s underwriters will have the 30-day option to acquire a further 7.45 million ADS’s once Sea floats, potentially raising the size of the offering to $800m.