Investors in Africa’s technology unicorn company Jumia have had a bucking bronco ride since it listed American Depository Receipts (ADRs, representing shares) on the New York Stock Exchange (NYSE). Similarly the company is learning fast that the world’s most developed public markets still have elements of the Wild West,
Jumia has seen the price of the ADRs more than double since it started trading on 12 April at $18.95, after an initial public offer (IPO) when people bought in at $14.50 a share. By 1 May it had climbed to $46.99, an impressive 224% increase for IPO investors.
The listing was the first IPO by an African startup on a major global exchange and the issue of 13.5m ADRs, representing shares accounting for 17.6% of the company, raised $196m for the e-commerce firm.
A report by US media company Citron Research published on 9 May claimed investors had been misled about the business model and revenues of Jumia in Africa The ADRs were already trading and the report triggered started to slip back, when the report came out there were two days of heavy trading and the price crashed nearly 25% to $24.50 on 10 May before sliding back to $19.92 by 17 May. US lawyers started preparing class-action lawsuits against Jumia.
On 13 May Sacha Poignonnec and Jeremy Hodara, co-CEOs of Jumia countered by releasing first-quarter results early, showing 58% growth in gross merchandise value (GMV) representing the total value of merchandise sold before deducting fees, and 102% increase in revenue. They said: “.. year-on-year improvement of 356 basis points of operating loss as a percentage of GMV and further development of JumiaPay, highlighted by the investment by and partnership with Mastercard. We believe that Jumia is increasingly relevant for consumers and sellers in Africa.”
Jumia was launched in 2012 as Africa Internet Group in 2012. Germany’s Rocket Internet, an incubator and venture capital fund based in Berlin, supported it and still owns 20.6% of the shares.
Its operates in 14 African countries, offering goods and services including online takeaway food, travel bookings and classified advertisements. In Nigeria it operates JumiaPay payment platform and a delivery service of leased warehouses, trucks and motorcycles, and allows African traders to sell online with more than 81,000 active sellers (defined as a retailer who received an order on Jumia in the last 12 months). The prospectus said there were 4m active shoppers, up from 2.7m a year before.
In 2016 it was valued at $1bn – earning the title “tech unicorn” – in a funding round involving South Africa’s Mobile Telecommunications Networks MTN, which owns 29.7% of the shares, investment bank Goldman Sachs, French insurer AXA and French telco Orange. Mastercard Europe snapped up $50m in Jumia ordinary shares before the New York IPO.
CEOs Jeremy Hodara and Sacha Poignonnec are French, both former employees of consultancy firm McKinsey, and the company is incorporated in Berlin. However it has corporate presence and pays taxes in Africa, has its headquarters in Lagos, operates exclusively in Africa, and employs more than 5,000 people in Africa. Juliet Anammah, the Nigerian CEO of the main country operation rang the NYSE ceremonial trading bell. Two Nigerian tech entrepreneurs Tunde Kehinde and Raphael Afaedor were co-founders but both left in 2015 to create other companies.
The company was still making heavy EBITDA losses of €172m in 2018, compared to revenues of €131m on gross merchandise volume of €828m, up from revenues €94m in 2017. Accumulated losses by 31 Dec 2018 were €862m. It has no plans to pay dividends and will focus on acquiring sellers and consumers, growing technology infrastructure and sales and marketing expenses.
A McKinsey report suggests African consumers will spend $2.1trn by 2025, and e-commerce could be 10% of that. Many tech firms take years to reach profitability and Jumia’s track record is only encouraging enthusiastic New York buyers.