Sea Ltd. fell more than 4% after founder Forrest Li announced it was freezing salaries for most staff and paying out lower bonuses this year, bracing for a worsening global economic environment in 2023.
The Asian internet giant needs to focus on profitability after a difficult 2022, the chief executive officer announced in an internal memo this week seen by Bloomberg News. Li warned that, with the war in Ukraine and inflation around the world, 2023 may prove to be “even more challenging.” It’s doing away with salary increases for staff who aren’t promoted, Li added.
Sea’s shares dived as much as 7.6% before recouping some losses in New York. Li’s memo emerged as major backer Tencent Holdings Ltd.’s co-founder Pony Ma delivered an unusually harsh end-of-year message to employees, warning the survival of some of the Chinese firm’s businesses was in question.
“I want to assure you we will be starting 2023 on stable footing,” Li wrote. “Most of the big changes we need to make are complete.”
The gaming and online retail giant has lost some 77% of its value this year on questions about its prospects in an era of rising interest rates and intensifying competition. A representative for Sea declined to comment on Li’s memo.
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Sea cut about 7,000 jobs, or roughly 10% of its workforce, as it fought to stem ballooning losses and win back investors. It’s also shuttered e-commerce operations in some European and Latin American markets and said it would reduce expenses to cope.
In November, the company announced a smaller-than-expected quarterly loss, spurring hopes that measures to curtail expenses will help it achieve profitability even as growth slows.
“I know such news can be hard to bear, especially around the holiday season,” Li wrote. “These are temporary but necessary measures to help us build toward a bigger, brighter future.”
