Our capital markets analyst reviews an exciting period including Jumia’s historic listing on the New York Exchange, Ethiopia’s plan to establish its first exchange and work on linking Africa’s seven biggest exchanges.
Africa’s tech unicorn soars 150% in 2 weeks after NYSE listing
It has been a rollercoaster ride for Africa-focused Jumia Technologies AG, which listed on the New York Stock Exchange (NYSE) and has already seen the price of its American Depositary Receipts (ADRs, representing shares) more than double and then crash back.
It is threatened by class-action lawsuits in the US, claiming investors had been misled. They are based on a report by US media company Citron Research published on 9 May.
The ADR price had climbed as high as $46.99 on 1 May, up by a massive 224% since its initial public offering (IPO) at $14.50 each, and up by 180% since they started trading two weeks earlier on 12 April at $18.95. The ADRs had started to slip back and 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.
Jumia countered by releasing its first quarter results early on 13 May, showing 58% growth in gross merchandise value (GMV), representing the total value of merchandise sold before deducting fees, and a 102% increase in revenue.
Sacha Poignonnec and Jeremy Hodara, co-CEOs of Jumia, said there was “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.”
The listing raised $196m for the e-commerce firm, which issued 13.5m ADRs, representing shares accounting for 17.6% of the company. It is the first African start-up IPO on a major global exchange.
The company was launched at Africa Internet Group in 2012, backed by Germany’s Rocket Internet, an incubator and venture capital fund based in Berlin which still owns 20.6% of the shares.
In 2016 it was valued at $1bn – earning the title “tech unicorn” – in a funding round involving South Africa’s 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.
Jumia operates in 14 African countries, offering goods and services including online takeaway food, travel bookings and classified advertisements.
In Nigeria it operates the 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.
Hodara and 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, 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 of €94m in 2017.
Accumulated losses by 31 Dec 2018 were €862m. It has no plans to pay dividends and its focus will include acquiring sellers and consumers and growing technology infrastructure.
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 greatly encouraged New York buyers.