Shares in Sea Ltd (NYSE:SE) fell sharply in early trade after TikTok, the video hosting platform, reported it was taking a controlling stake in the e-commerce subsidiary of GoTo Gojek Tokopedia, Indonesia’s biggest tech company.

Sea Ltd owns e-commerce platform Shopee — the largest online retailer in Southeast Asia. According to data published by Seeking Alpha, the Singapore-based tech conglomerate commands 36% of Indonesia’s e-commerce gross merchandise value, worth around $18.6 billion in 2022.

Shares in Sea Ltd have had a tumultuous ride since listing at $16.25 on NYSE in October 2017. They hit a pandemic peak of $372 in October 2021 before falling precipitously over the subsequent year. On Monday, the shares fell 6.5% in early trade to $37.60.

Also Read: TikTok Pumps $1.5B Into Indonesia’s GoTo Group To Revive Shopping App

Indonesian Ban On Social Media E-Commerce

The shares had a bump higher in September after the Indonesian government banned goods transactions on social media websites such as TikTok, to preserve the livelihoods of small and medium-sized retailers which struggled to compete with the media giants.

“Now, e-commerce cannot become social media. It is separated,” said trade minister Zulkifli Hasan at the time, adding that the new regulation would help ensure “equality in business competition.”

TikTok’s $1.5 billion deal with GoTo will merge TikTok Shop with Tokopedia, with TikTok taking a controlling 75% stake in the combined entity.

More than 90% of the combined businesses’ merchants are the small and medium-sized enterprises that the regulations sought to protect. Thus, TikTok can do business again in Indonesia, under the scrutiny of the regulator.

Working With Regulators

In a joint statement, the two companies said: “The strategic partnership will commence with a pilot period carried out in close consultation with and supervision by the relevant regulators.”

It added: “Going forward, TikTok, Tokopedia and GoTo will transform Indonesia's e-commerce sector, creating millions of new job opportunities over the next five years.”

Shares in other e-commerce firms that operate in Indonesia were down on the local exchange. Bukalapak, fell 3.5%. Shares in Goto, meanwhile, tumbled 20%.

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