IPO Verdict: Jumia Sure Trades Like the ‘Amazon (or Alibaba) of Africa’

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Not all initial public offerings have been considered hot in 2019, but don’t tell that to Jumia Technologies A.G. (NYSE: JMIA). This is said to be the first unicorn valuation for an African technology company, as it is called the “Amazon of Africa” in some reports, with a large online marketplace in Africa for electronics and many other consumer goods. Not only did it surge on the IPO, but it surged again on its second day of trading.

After selling 13.5 million American depositary shares at $14.50 apiece on Friday, Jumia raised about $196 million in its offering after being founded in 2012.

Jumia had about 4 million active consumers at the end of 2018, up about 48% from the number of consumers using its platform in 2017. The company is said to have partnered up with thousands of local African companies and has over 50,000 international and national brands making up 6 million products available for sale on its site.

The company’s active e-commerce services are available in 14 countries, and those 14 countries are said to account for about 72% of Africa’s gross domestic product. Total 2018 revenue rose 39% over 2017 to reach $149.6 million, but the company also posted a loss of some $195 million for the year.

Jumia shares closed up 75% at $25.46 on Friday on more than 9.4 million shares. Its shares were last seen up another 45% at $37.11 on Monday, with trading volume of more than 10 million shares before the end of the trading day.

Here are some basic statistics about Jumia and its platform:

  • Jumia is the number-one online shopping site in Nigeria and is a competitor of Kilimall in Kenya and a competitor of Konga in Nigeria.
  • Its list of nations where it operates at this time includes Algeria, Cameroon, Egypt, Ghana, Ivory Coast, Kenya, Morocco, Senegal, Tanzania, Tunisia and Uganda.
  • From the 4 million subscribers, Jumia claims to have over 15 million monthly visitors.
  • Since its founding in 2012, Jumia has not been profitable on a consolidated basis, with a 2017 loss of €165.4 million and a loss of €170.4 million in 2018, with a total accumulated loss of €862.0 million since inception.
  • Jumia’s key underwriters included Morgan Stanley, Citigroup, Berenberg, RBC Capital Markets, Raymond James, Stifel and William Blair.

Similar to the recent Lyft acquisition, Jumia’s F-1 filing included the warning that it may never be profitable:

There is no guarantee that we will generate sufficient revenue in the future to offset the cost of maintaining our platform and maintaining and growing our business. Furthermore, even if we achieve profitability in certain of our more mature markets, where e-commerce is growing rapidly, there is no guarantee that we will be able to break even and achieve profitability in other markets, where e-commerce adoption is slower. We expect that our operating expenses will continue to increase as we intend to expend substantial financial and other resources on acquiring and retaining sellers and consumers, growing and maintaining our technology infrastructure and sales and marketing efforts and conducting general administrative tasks associated with our business, including expenses related to being a public company. These investments may not result in increased revenue growth. These investments may not result in increased revenue growth. If we cannot successfully generate revenue at a rate that exceeds the costs associated with our business, we will not be able to achieve or sustain profitability or generate positive cash flow on a sustained basis and our revenue growth rate may decline.

If Jumia really is the “Amazon (or Alibaba) of Africa,” then maybe it’s the Amazon of 2000 or 2001 rather than the much more complex Amazon of 2019.

It’s hard to call a company the “(insert hot stock) of (insert any emerging nation/s)” after two days of trading. That said, there has been a growing excitement for years and years that Africa could one day deliver on the numerous growth avenues that its large populations can offer. Now Jumia just has to see if it can find a way to be profitable and enough financing to last until that day arrives.

Jumia’s market cap is not quite $3 billion, even after the two-day surge since its IPO.

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