The share of Sea Limited (WKN: A2H5LX) is also experiencing a mixed start in the new stock market year 2022. In the few trading days of this trading period, the share certificates have already slumped by approx. 12.4%. The general correction of the corona profiteers is also decisive for this development.
As of Tuesday of this week, however, the minus is again particularly strong, at over 10% in the meantime. There are fundamental reasons for this performance, including a larger investor selling a block of shares in the Southeast Asian group. Would it be better for Foolish investors to follow suit?
Tencent sells shares of Sea Limited
More precisely it is Tencent (NASDAQOTH: A1138D), which has now sold a major stake in Sea Limited. It is rumored that the Chinese tech conglomerate has sold around 2.6% of all outstanding shares, but still holds around 18.8% of all shares in the Southeast Asian group. Whether this is an opportunity or a risk is certainly not an easy puzzle.
With 14.5 million shares that Tencent has sold, the equivalent is anything but small. At a sales price of $ 208 per share, the sales volume is just under $ 3 billion. It seems clear that this in turn will put a strain on the share price. Especially since Tencent itself had to accept a discount. The original intention was to sell the shares at a price of $ 208 to $ 212.
The big question now is, of course, whether the major investor will throw more shares in Sea Limited onto the market. According to an agreement with the investor, that shouldn’t be the case for at least the next six months. However, there is basically the possibility. Also because Tencent might want to position itself a little leaner. Or would like to recover values inside the group in order to defy the China sell-off a little.
I am not following the example
In any case, as a Foolisher corporate investor, I would not follow suit. Sea Limited continues to be an exciting stock that has potentially three megatrends. In addition to mobile games, it is above all e-commerce with Shopee and Sea Money that can continue to grow strongly in the long term. Whereby they are cross-subsidized across the group by Garena, the mobile games segment, which is of course a risk.
Nevertheless, neither a market capitalization of approx. 108 billion US dollars nor a price-to-sales ratio of approx. 10 are too expensive for a company that has clearly double-digit to even triple-digit growth rates. Now, with a discount of well over 30%, would be the worst time for me to sell this stock. Or at least a bad time so far. Cheaper is of course possible, especially if Tencent should sell more shares of Sea Limited.
The item Tencent Sells Sea Limited: Should You Follow? first appeared on The Motley Fool Germany.
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Vincent owns shares in Sea Limited. The Motley Fool owns shares of and recommends Sa Limited and Tencent Holdings.
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