Jumia cashes in on bullish stock trading aims to raise US$400m to finance expansion drive

AFRICA – The New York Stock Exchange listed Africa-focused eCommerce company, Jumia is seeking to raise US$400 million by floating 9 million American depositary shares (ADS).

ADS are stocks offered by non-US companies, available to be purchased by US investors. Secondary sales like this are usually done by public companies to finance debt or facilitate growth.

The Ecommerce giant with stock trading at US$42.14 on Monday, aims to raise more cash to fund its expansion drive.

Jumia listed the ADSs at US$50 per share, but investors could buy these shares at various market prices.

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The move comes barely 3 months after the company sold almost 7 million shares at an average price of US$30.51 despite initial listing of $36.8, raising US$243.2 million in the process.

Apparently, according to reports by Techpoint Africa, this latest funding plan was in the works since July 2020.

Jumia made a loss of US$177 million in 2020, an improvement on the US$270 million of 2019

In July 2020, when Jumia’s stock market rally began to show promise, the company filed a document with plans to raise cash by selling up to 18 million ADS as often as it deems fit.

Critics have expressed mixed feelings on the move, with some highlighting it’s a smart move from the company as it is cashing in on the rise in share price it has enjoyed in the past eight months.

However, others have been quick to note that Jumia has not made a profit since it launched and although its losses have slowed down, they are still substantial.

In 2020, the company lost US$177 million, an improvement on the US$270 million that it lost in 2019.

The observers are of the view that the African unicorn is bleeding cash and now that it is a publicly listed company, burning cash at that rate could be tricky.

Its cash balance for the year ended 2020 was US$361 million despite the fact that it raised funds in December.

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In addition, the recent sale will dilute current shareholders by almost 10%. This means the earnings per share (EPS) would reduce. However, Jumia reveals that it does not currently pay dividends on its shares.

As part of its expansion plan, the ecommerce firm is planning to introduce its food delivery service in Egypt during the first quarter.

The move will make Egypt the tenth market where the ecommerce giant will be offering its restaurant delivery services, joining Nigeria, Côte d’Ivoire, Kenya, Morocco, Tunisia, Ghana, Uganda, Algeria and Senegal with exemption of South Africa.

According to Co-founder of Jumia Sacha Poignonnec, food makes up 20% of overall transactions on the platform and is growing quickly making it an important segment of the company.

Despite restaurants in markets like Morocco closing early at times due to lockdowns, the still completed five million online food orders in 2020.

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