Africa’s biggest e-commerce startup, Jumia Technologies, is set to list on the New York Stock Exchange in April, ending months of speculation. The online retailer plans to offer 13.5 million American depositary shares with a price range of $13-$16--though the final price will be set after the company’s planned investor roadshow. The upper end of that range gives Jumia a valuation of $1.2 billion, thus making it Africa’s first unicorn to list on an American exchange.
The company has also received a cash injection of $56 through million private placement from MasterCard Europe. This means that MasterCard will purchase shares worth that much at whatever price the market will give it. This gives the young company a confidence boost ahead of an uncertain listing.
Jumia will trade under the ticker symbol ‘JMIA.’
Who is Jumia?
Launched in 2012 in Nigeria by the Africa Internet Group (AIG), Jumia has fashioned itself as the “leading pan-African e-commerce platform.”
According to SEC filings, the company operates in 14 countries representing 72 percent of the continent’s GDP estimated at $2.2 trillion.
Jumia is a vertically integrated company that provides a marketplace for a wide variety of goods, payment services, logistics, and delivery options.
The company is more than a mere e-commerce company, operating its own online payment platform (JumiaPay) and also provides logistical services via Jumia Logistics including its own last-mile fleet of delivery vehicles.
Like many startups, Jumia’s top line is growing at an admirable clip whereas the company has not yet figured a way to turn a profit. According to its updated S1 documents, Jumia recorded net revenue of 130.6 million Euro in 2018, a healthy 38.9 percent Y/Y growth. However, its losses continued widening, from 165.4 million Euro in 2017 to 170.4 million Euro in 2018. It’s adjusted profitability metrics are not too good either, with adjusted EBITDA clocking in at -150.1 million Euro in 2018 from -126.8 million Euro in 2017.
As of the end of 2018, Jumia had accumulated losses of close to a billion dollars and had a negative operating cash flow of $159.2 million.
IPOs losing money
Jumia is in good company, though.
Amazon consistently lost money during its first few years as a public company, and would still be operating on razor thin margins if it were not for its hugely profitable cloud business, AWS.
Is the lack of profitability likely to deter investors? Jumia seems to be having little trouble raising funds. According to CrunchBase Data, the company has held four rounds of funding and managed to raise $767.7 million.
But if the Lyft IPO is any indication, then Jumia could be in for a rough ride.
The ride-hailing company had a pretty good IPO, with the shares soaring 20 percent on its Friday IPO. Yet, the shares reversed, giving up nearly all their gains on Monday’s trading session. Experts are warning that unlike in the past, the market is now punishing money-losing companies.
Just like Jumia, Lyft’s losses have been widening, with the company booking a $900 million loss last year. In fact, IPOs this year have not been faring very well with many losing money shortly after going public. That’s a sharp reversal from the past years whereby shares of unprofitable unicorns that IPOd have performed better than profitable ones.
(Click to enlarge)
By Alex Kimani for conil.me