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Sea Ltd. A Controversial Situation

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For all the “cash grab”  accusations that have been directed at the thousands of Initial Coin Offerings (ICOs), they represent chump change compared to Sea Ltd. (NYSE:SE) The Singapore based company went public just last October raising $880 million.  That placed a value on the total company of almost $2.6 billion by our calculations.  That is a huge valuation for a company that was losing $200+ million at the time.

Sea Ltd. was fortunate in convincing top underwriters to do their offering. The list included no less than Goldman Sachs, Morgan Stanley and Credit Suisse.  The opportunities for Sea Ltd. look pretty awesome as we describe below.  The financials reports of Sea Ltd reveal a different story.

On February 28, Sea Ltd. reported full year 2017 revenue of $414 million, up 19.8% year over year.  The company racked up a whopping $561 million loss, a 149% increase over the previous year.  Not many companies can afford to lose more money than they generate in revenues.  Sea Ltd. is one of those rare few, and that has investors nervous.  Is Sea Ltd simply misunderstood or is the stock a ripe target for short sellers?

How They Generate Revenues

Sea claims to be the leading internet company in Greater Southeast Asia, or GSEA, based on their number one market share by revenue in the region’s online game market, their number one market share in the region’s e-commerce market, and their position as a leader in the region’s digital payments market by e-wallet.

That is a lot of market leadership when Sea revenues were less the $400 million annually.  It appears everywhere we read the company claims market leadership but qualifies this by limiting the time period such as “June 2017” or in small regions.  That sort of language always makes me wince.

Huge Addressable Market

It is not difficult to appreciate the enormity of the GSEA market. Here are a few stats from the October prospectus.  GSEA contains 585.3 million population generating $3 trillion in GDP.  If that were not enough, there are 315.4 million Internet users and 237.1 million smartphone users.

That is the overview, here is what made Sea Ltd. appealing to initial investors back in October.  The size of the online game market is $3.5 billion growing at 19.6%.  The e-commerce market is placed at $23 billion growing just under 30% followed by the $6.5 billion electronic payment business showing a 30+% expansion.  That is pretty impressive stuff.

The Business Model

Sea has created  an integrated platform consisting of digital entertainment (focused on online games), e-commerce, and digital financial services (focused on e-wallet services), each localized to meet the unique characteristics of GSEA.

Sea operates with three main platforms that also serve as consumer brand names. These include Garena (Video Games), Shopee (e-commerce) and AirPay (financial services).

Garena

The Garena platform is a gaming network where Sea creates exclusive licenses with developers.  Online gaming licenses typically run three to seven years.  During this period fees are charged to platform members of which Sea retains 65%-80% of gross billings.  Other related services include video content such as live streaming of online gameplay, chat and online forums. Finally, Garena claims they are the GSEA leader in eSports.

All in all there is little doubt the markets that address are large and growing. Eventually we will come to how Sea makes money.

Shopee

Think of Shopee as a small but rapidly growing Amazon, Ebay or Alibaba wannabe. Shopee is a third-party marketplace that connects buyers and sellers.  They do not hold inventory.  Management believes buyers choose Shopee because they trust the brand to
provide easy access to a wide range of products coupled with strong customer service.

AirPay  

The AirPay platform provides digital financial services.  Through the AirPay e-wallet, consumers use either the AirPay App or one of 177.9 thousand registered retail partners,
to make payments to a wide variety of product and service providers.

During the first half of 2017, transactions for AirPay e-wallet totaled nearly $475 million. The AirPay App is available in Thailand, Vietnam and Taiwan, and AirPay counters are operating in Thailand, Vietnam, Indonesia and the Philippines. This leaves considerable territorial expansion opportunities for the future.

Management is in the process of integrating AirPay with Garena where it recently processed 40% of aggregate gross billings.  AirPay provides payment services to Shopee as well.

Use Of Proceeds

The IPO raised gross proceeds of $880 million for approximately 32% of the Class A shares. Based solely on this, underwriters placed roughly a $2.6 billion valuation on Sea Ltd. This excludes 151.5 million Class B issued and outstanding shares.  The value is not determinable at this time.  Accepting the vast market potential for the company’s services, what did investors get in return.  Let’s dig into the financials starting with the Use of Proceeds statement taken directly from the October prospectus.

“The primary purposes of this offering are to create a public market for our Class A ordinary shares in the form of ADSs for the benefit of all shareholders, retain talented employees by providing them with equity incentives and obtain additional capital. We plan to use the net proceeds of this offering primarily for growing our business, including user acquisition, content procurement and research and development, as well as for working capital and other general corporate purposes.”

What would have been nice is if there was some mention of how a huge chunk of the proceeds would be used to pay down a mountain of debt: about $674 million of long term debt. Little wonder investors are nervous.

There is absolutely nothing wrong with paying off debt especially if it results in a benefit to equity shareholders.  However, with the company losing money at nearly $561 million, it is a bit challenging to find how shareholders come out ahead.  Based on analyst projections, Sea Ltd. is not likely to make a profit until at least 2020 and that means they will be in a negative cash flow position for quite a while.  

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 115 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Project to Watch: Sentinel Protocol

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The creators of Sentinel Protocol set themselves the goal of overcoming the current disadvantages of decentralization in the field of cryptocurrency technologies, turning this ecosystem into a safe and protected environment from hacker threats.

Using a collective intelligence system created by using decentralization, the project combines cryptographic functions and threat analysis algorithms based on artificial intelligence to create a secure, innovative platform.

Creation History and Team

The creators of the project note the current difference in the level of protection against security threats between individual users and business users. The latter can afford to spend large amounts of money to ensure their IT security.

According to the SANS Institute, in 2016 the largest category of costs for financial institutions was to ensure cyber security (10-12% of the annual budget of organizations). The report of Cybersecurity Ventures argues that the size of the market of protection systems in this area will grow by $ 1 trillion from 2017 to 2021 since the constant increase in the number of cybercrime led to a critical level.

The DAO case in 2016 was the first serious incident in the field of a security breach in blockchain technology and gave the developers of the Singapore-based Uppsala Foundation idea to create the Sentinel Protocol project.

Core team:

  • Patrick Kim (founder and CEO, has experience with Cisco, Palo Alto Networks, Fortinet, F5 Network and Darktrace).
  • HM Park (co-founder, head of operations, worked at F5 Networks, Darktrace, Penta Security Systems).
  • John Kirch (chief evangelist, worked at Darktrace, Watchguard, Softbank, Bank of America).
  • Dayeol Lee (Lead Developer, graduated from the University of California, Berkeley, received a doctorate in computer science, a security systems specialist, and previously worked at companies such as Penta Security Systems, Inc. and WINS Co., Ltd.).
  • Guo Feng (lead developer, worked on the Singapore Exchange, Accenture, and NCS).

Overview of Main Features

Although blockchain technology is aimed at ensuring the confidentiality of personal data, the lack of a guarantee of confirmation of the user’s identity does not allow him to take part in financial services and projects. A blockchain consortium could be a way out of this situation, although it is associated with some drawbacks of public decentralization. The creators of the Sentinel Protocol offer their approach to solving this problem.

The Security Intelligence Platform for Blockchain (SIPB or Sentinel Protocol) has the following security features:

  • Threat database (TRDB);
  • Built-in secure wallet with machine learning (S-Wallet);
  • Split Isolated Malware Analysis Environment (D-Sandbox).

Threat Database

TRDB immediately solves two problems related to current cyber security threats. The first is a centralized database of security companies. Storing information about threats in one centralized location makes the data vulnerable to manipulation and abuse. The database becomes an obvious target of the Sybil attack, a server is hacked, and the service is interrupted. This is the fundamental problem of the centralized client-server model in the modern Internet.

The second problem is the lack of common knowledge among companies specializing in providing IT security. The more risk information collected, the higher the likelihood of preventing cyber crime. This is due to the lack of incentives for such companies to join and collaborate to create one comprehensive database.

Thanks to the collective intelligence, TRDB is able to efficiently collect data about hackers, malicious links, phishing addresses, virus software, etc. TRDB is updated only by security experts to eliminate systematic errors, such as false positives. However, ordinary users can also participate in this process in two ways – through the functions of automatic and manual reporting.

In the first case, unknown threats will be automatically detected by the security system of the wallet based on the machine learning mechanism and sent to the database. Manual reporting allows the user to report risks. The community will subsequently verify this information.

TRDB will be provided in the form of an API so that this information will be available to any person or organization.

S-Wallet

S-Wallet has the functionality of antivirus software, but it also has a fundamental difference. Antivirus software responds best to new threats only after receiving the latest updates via a centralized server. This approach is ineffective against new unknown threats, such as zero-day attacks.

S-Wallet analyzes threats, their trends, and history to respond to unknown attacks.

S-Wallet uses collective intelligence by connecting to TRDB and provides essential security services, such as cryptocurrency address filtering; URL/URI filtering; data analysis; search and detect fraud risk.

The fraud detection system (FDS) is based on machine learning technology operates on all distributed registers and identifies transactions that could potentially be fraudulent, thereby preventing secondary damage.

D-Sandbox

D-Sandbox is a security mechanism for running untested programs and code on a separate virtual machine without risk to the entire system or host. This feature is based on analysis using the collective mind.

D-Sandbox has two key benefits. Firstly, this approach has significant economic benefits. This ensures infinite scaling across distributed systems and is limited in operation only by the potential of virtual machines. The second advantage is that D-Sandbox is not only able to solve the problem of loss of computing power using the PoW algorithm, but is also capable of creating a better security ecosystem. The computational capability of the Sentinel Protocol network nodes can be used for additional analysis to detect malware.

In the end, the advantage of a decentralized system is that free resources can be used where they are needed. Moreover, individual users will help by using D-Sandbox through a virtual machine to improve the overall security of the ecosystem.

Sentinel Protocol Ecosystem

One of the biggest obstacles to business continuity in the cryptocurrency industry is security. Recently, the number of customer hacking incidents and costs has increased significantly, and security systems could not cope with a threat level.

The Sentinel Protocol overcomes this problem, which security experts are working on in the field of cryptocurrency technologies by combining collective intelligence.

By joining the Sentinel Protocol community, users of digital currencies can easily get knowledge and help on all security issues. They can also use security solutions provided by the Sentinel Protocol. This approach is aimed at ensuring the overall security of the cryptographic world and its prosperity based on the fundamental principle of decentralization.

Theft Protection System

While a large number of cryptocurrency applications are entering the market every day, there is currently no system for checking the integrity of digital assets. This means that it is impossible to track and identify the stolen virtual money.

To fight this, the Sentinel Protocol will act like bank card providers that block plastic cards in case they are stolen or lost. The system will track all stolen cryptocurrencies and pass this information to providers of crypto resources. Then, stolen digital assets will be tagged and will not be used to exchange, pay, or convert to fiat money.

Prevent Transaction Distortion

Addresses registered as fraudulent and all related addresses will be entered into the database, which will be available to all system participants in real time.

One of the examples of this approach is an ICO fishing, in which thousands of people participate in a short period of time. Even if the hacker changes his address and transfers his funds to him, all users will be automatically notified of the new suspicious address. This can completely change the security industry paradigm, as there is currently no such platform that could provide users with such information.

As of today, there is merely no systematic approach to identifying suspicious persons and ensuring the protection of users from potential damage.

Sentinel Protocol Consensus

The platform uses a delegated proof of stake algorithm (DPoS), presented by BitShares and invented by Daniel Larimer. The “guards” appointed by employees of the Uppsala Foundation are a group of trusted institutions or individuals with the necessary qualifications, including security teams on servers, employees of specialized research firms or a group of white hackers. All of them will be certified to confirm their status and experience.

They will receive points for work performed, such as identifying threats and fraudsters. Based on their effectiveness, users will be able to vote for a particular “guard,” increasing or decreasing its reputation. If the actions of the “guard” dishonest in his hand are harmful, he will lose his reputation.

Trading and Liquidity

  • Ticker – UBT
  • Major exchanges – Bitrex, Ubbit
  • UPP token price $0.0134082748 (+3.82%);  0.0001487522 ETH; 0.00000391 BTC
  • 24h Volume $649,370 Market Cap $3,092,586
  • Returns since ICO: 0.11x USD; 0.73x ETH; 0.24x BTC

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.9 stars on average, based on 29 rated postsVladislav Semjonov has a legal and financial background. He has been involved in crypto space since early 2017 in both ICO advising positions in several ICO consultancy firms, and as an ICO analyst for VC. He began contributing for Hacked.com in April 2017.




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Project to Watch: Eximchain

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The Eximchain project is designed to help companies organize supply chains. The solutions that will be implemented on the platform are aimed at ensuring the possibility of establishing effective and reliable business connections, transactions and information exchange.

Team

The American project Eximchain (Export and import on Blockchain) was founded in 2015 at the Massachusetts Institute of Technology. Since then, its authors have created a set of key-based toolkits to transform the global supply chain by integrating it into a platform. The ideas proposed by the project developers are aimed at improving the transparency of the ecosystem.

A group of 20 experts and consultants is working on the creation of the platform, including:

Hope Lew – Co-founder and CEO, received a bachelor’s degree from Peking University and an MBA from the Massachusetts Institute of Technology, handled international transactions at the Asian branch of UBS for 6.5 years, is the head of the laboratory of the Association of Office Supplies of North America.

Juan Sebastian Huertas -Co-founder and technical director, received a bachelor’s degree in computer science from the Massachusetts Institute of Technology, began studying programming at age 13, previously advised many startups on technical aspects.

Jiang Xu – Business architect, previously worked at IBM for 14 years, with previous roles as executive project manager and enterprise software distribution manager.

Jia Zhang – Business analyst, has been in the supply business since 1994, has been managing global trade finance and international settlement at ICBC for seven years, then took the position of Chief Representative of MS Textiles in China, where she has been working successfully for about ten years.

Strategic partners of the project include:

  • blockseed.vc
  • alphabit.fund
  • fbg.capital
  • hashed.com
  • inblockchain.co
  • kenetic.capital
  • signum.capital
  • emurgo.io
  • enuma.io
  • gbic.io
  • YOOsourcing

Main Project Goals

Eximchain’s authors intend to innovate and change the current supply chain organization system by overcoming barriers, strengthening coordination and increasing confidence in cross-border operations using blockchain technology.

The Eximchain platform will offer ample opportunities, from networking with suppliers to inventory management. The product will operate from a public blockchain with a high level of confidentiality. It is ideal for corporate use by supply chain organizations and application developers who need blockchain technology.

All stakeholders involved in creating effective supply chains will be able to more effectively and securely cooperate, carry out mutual settlements and exchange information.

Partnership with YOOsourcing

Eximchain developers have developed a partnership with the YOOsourcing platform, which allows users to verify the authenticity and reliability of suppliers.

Thanks to the YOOsourcing partnership, users of mobile applications will be able to fulfill requests from suppliers directly from the supplier’s company profile. The platform has a built-in verification system designed to ensure the accuracy of the displayed information.

This will allow suppliers using the Eximchain platform to track their requests, promote new products and develop tactics to attract future business leaders. Using the blockchain technology in the platform will increase confidence in accountability, data storage and agreements between suppliers and buyers on the YOOSourcing platform.

Token 

Digital coins on the platform will be based on the standard ERC-20 protocol. The purpose of their creation is to act as a valid register for the genesis file of the Eximchain main network. The ERC-20 routers will be distributed across the Ethereum blockchain by the corresponding ERC-20 smart contract. They are repurchased for Eximchain’s internal tokens after the network has been launched.

With the launch of the main network, Eximchain’s internal tokens will be used to pay for network charges, check state changes, and management functions.

They are also designed to access applications built on the Eximchain network, such as smart contracts and products developed using the SDK platform.

Advantages of Smart Contract SDK

The use of smart contracts for developers provides many advantages and opportunities:

Financing. It is carried out through instant and transparent order confirmation and check on the blockchain. Suppliers will be able to receive prepayments, and buyers will be able to use the option of arbitration.

Procure-to-Pay. Users will be able to conduct an audit through a finally agreed contract at each stage of the payment procedure. This process will be carried out in real time via the network without the need for trust and the use of a secure protocol.

Platforms of suppliers or rating agents will be able to use the “Proof of Existence” (PoE) algorithm to control time, check the integrity of documents and other purposes. This will allow independent verification without the need for data disclosure.

Inventory Management. Conducted by sharing real-time demand information to create a supply chain. This will allow participants to improve their inventory plans and automate the alignment process in different registers and systems to save time and reduce costs.

Risk mitigation. Eximchain will allow for real-time dynamic monitoring of processes within the supply chain to ensure the visibility of all operations. Participants will be able to control risks through a single function.

Price and Liquidity

The EXC token price is currently valued at $0.0274281298 (-13.52%), which is equivalent to 0.0002654258 ETH and 0.00000712 BTC. Its 24-hour volume is$18,756 and has an overall market cap of $1,846,090.

Returns since ICO: 0.08x USD, which is equivalent to 0.70x ETH and 0.19x BTC. The token is listed on Bilaxy and Idex.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.9 stars on average, based on 29 rated postsVladislav Semjonov has a legal and financial background. He has been involved in crypto space since early 2017 in both ICO advising positions in several ICO consultancy firms, and as an ICO analyst for VC. He began contributing for Hacked.com in April 2017.




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Uber: $120 Billion IPO?

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Uber Technologies Inc., the global ride-hailing giant, is reportedly eyeing an initial public offering (IPO) worth as much as $120 billion. According to The Wall Street Journal, the IPO could take place early next year, giving investors ample time to prepare.

More Valuable than the Auto Giants

The $120 billion value proposal was delivered to Uber last month by Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS), two of Wall Street’s largest banks. The banks were presumably advising Uber on how to position stock offerings to potential investors before underwriting the IPO.

The new valuation far exceeds the one Uber received from Toyota Motors Co (TYO), which priced the ride-sharing service at %72 billion.

At $120 billion, Uber would be worth more than the General Motors Co (GM), Ford Motor Co (F) and Fiat Chrysler Automobiles (FCA) combined. The Detroit auto giants have seen their valuations rise in the wake of the financial crisis, buoyed by a prolonged recovery and increased appetite for automobiles. However, their growth has paled in comparison to Uber’s, which was founded in 2009.

Uber’s expansion hasn’t been without growing pains. The company has been mired by regulatory bottlenecks, workplace scandals and the alleged theft of trade secrets from Alphabet Inc. (GOOGL), Google’s parent company.

It is not entirely clear what metrics the Wall Street banks used to evaluate Uber’s potential value. The company reportedly told Morgan Stanley it won’t be profitable for at least another three years, though annual revenues are expected to reach up to $11 billion this year. That’s a marked rise over the $7.78 billion generated in 2017.

While there’s no guarantee that Uber will go public in the proposed timeframe, it must issue a public offering by the end of 2019, according to WSJ sources. That’s the agreement it has in place with investor SoftBank Group Corp.

Uber by the Numbers

Uber’s startling growth over the past nine years can be represented by a few statistics. As of May 8, 2018, the company had 19,000 employees. This doesn’t include the more than 3 million drivers who are getting paid through the ride-hailing service. Since inception, Uber drivers have completed some 10 billion rides. This averages out to about 15 million rides each day. Gross bookings in 2016 alone amounted to $20 billion.

As of June, 75 million riders were using the Uber app. In the U.S. alone, adult users are projected to reach 48 million by the end of 2018. The Uber app is installed on 21% of U.S. adult Android devices.

Currently, Uber owns up to 87% of the U.S. ride-hailing market. The growth and widespread adoption of the service has opened the door to other competitors, with Lyft being the biggest. Founded in 2012, Lyft is available in about 220 cities across the U.S. as well as in major cities across Asia.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 699 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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