Based in Singapore, Sea Limited (NYSE:SE) operates e-commerce websites for countries in Southeast Asia and Taiwan. Plus, the company offers online video games in Latin America and Southeast Asia. Therefore, international tech market investors might consider a position in SE stock.
Just as a Bollywood movie is typically rife with action and drama, Sea Limited has provided active traders with constant excitement and thrills. However, not every development has been a positive one.
Notably, regulators in India have taken steps to crack down on perceived cybersecurity threats. As we’ll see, Sea Limited and its shareholder may have suffered collateral damage due to India’s regulatory measures.
Even as SE stock falls, though, not everyone is pessimistic about Sea Limited. Indeed, there’s at least one well-known investor whose fund bought the dip with a mega-scale share purchase.
A Closer Look at SE Stock
After the U.S. equities market bottomed out in March of 2020, many technology stocks rallied hard. Some of them went up too far and too fast and were probably due for a correction.
This may have been the case with SE stock, which soared from $38 in March 2020 to $372.70 in October 2021. An almost-900% return on investment might be something to celebrate, but it is also an indication that a retracement is likely imminent.
There aren’t any meaningful support levels to speak of here, as the Sea Limited share price just ascended without interruption and then crashed. By late February, the stock was hurtling toward $100.
Since SE stock is so volatile, it is important to maintain small position sizes and have an exit strategy. Don’t expect a revisit of $300 in the near future — for the time being, let’s just hope for the carnage to stop.
A Magic Wand
As I mentioned earlier, Sea Limited is involved in e-commerce websites, as well as video games. Lately, the company’s video-game business has been the focus of regulators in India. To quote InvestorPlace contributor was Sea Limited’s breakthrough video game and a “magic wand” for the company.
Developed by Sea Limited subsidiary Garena, Free Fire is known to be addictive. This game, along with other video-game titles, helped Sea Limited’s Digital Entertainment segment surpass 729 million active users by September 2021.
That magic wand was recently broken, however. Reportedly, India’s Ministry of Home Affairs has banned Free Fire, along with 53 other apps, not all belonging to Sea Limited.
In response to this ban and Free Fire‘s unavailability on certain platforms in India, Garena stated, “We are working to address this situation, and we apologise to our users for any inconvenience.”
Wood Buys the Dip
As you might expect, the Free Fire ban didn’t help SE stock stay afloat at all. If anything, it probably hastened the stock’s drawdown.
Famous investor Cathie Wood doesn’t seem to be deterred by the stock’s decline, however. In a Bollywood-like dramatic turn of events, Wood’s Ark Invest reportedly purchased over 145,000 shares of Sea Limited. I cannot confirm Wood’s reasons for approving such a large share purchase. Still, it is possible that she simply saw an irresistible value proposition in Sea Limited.
Prospective investors should understand that video games aren’t Sea Limited’s only revenue source. In fact, the company recorded $4.6 billion in total payment volume in Sea Limited’s mobile-wallet business.
Besides, Sea Limited might not actually pose any cybersecurity threat at all. “We comply with Indian laws and regulations, and we do not transfer to or store any data of our Indian users in China,” the company assured.
If that is true, then Sea Limited might not continue to be a regulatory target — or at least, that is what Wood and other investors should hope.
The Bottom Line on SE Stock
I’m certainly not suggesting that anyone should buy SE stock just because Ark Invest took a stake. Wood’s involvement is an interesting point to mention, though.
More importantly, Sea Limited’s revenue doesn’t solely rely on Free Fire. The company can continue to generate capital with or without that particular game.
In the final analysis, don’t count on SE stock to provide another 900% rally anytime soon. Instead, be realistic — and be ready for more drama and excitement from Sea Limited.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.