Barely seven years old, Jumia is the first ever African tech start-up company to sell its shares on the floor of the New York Stock Exchange. Now, filing the necessary documents at the US Securities and Exchange Commission is not a big deal (any public company can do that as long as it fulfils the necessary legal requirements). The point is that Jumia not only got the ceremonial listing, but went ahead to rake in a whopping $200m, with its shares value rising to an astronomical 75% from its starting price, meaning that Jumia at market cap of $3.9 billion, is now worth more than GTBank, Nigeria’s largest bank by market cap. Here are a few points to take away from this:
Why in the US?
Doesn’t it look like some big hypocrisy that Jumia would be listing on the New York Stock Exchange while it is not even a public company in Nigeria? The fact still remains that, according to Jumia’s IPO prospectus filed in December 2018, the e-commerce company has garnered losses up to $974 million. To be qualified to list in Nigeria, a company must be registered as a public limited company with no restrictions on the transfer of fully paid shares; have a minimum of three (3) years’ operating track record; have a pre-tax profit from continuing operation of not less than N300million cumulatively for the last three (3) fiscal years and a minimum of N100 million in two (2) of these years. Hence, listing in Nigeria soon may not be immediately on the horizon for Jumia Nigeria Ltd.
E-commerce is Not Yet Profitable in Nigeria?
To start with, Konga gave up the ghost earlier than expected and got swallowed up by Zinox Group, a deal that was quoted in some quarters to be worth $32.4 million, which was grossly a sad event for an e-commerce company that was once valued at $383 million by Naspers. Even Jumia, which prides its recent feat as the first of its kind in Africa is listed at NYSE as an African tech start-up, yet it belongs to three French Brothers and is headquartered in Berlin Germany. More still, if the company eventually makes profit in a final sigh of relief, it is doing so not as a wholly ecommerce company but as a listed company with lots of easily accessible public funds. How soon ecommerce in Nigeria starts making profit would really be important for the surging investors in the industry.
Are Nigerian Investors Afraid of the Ecommerce Bubble?
From disclosures made in the Prospectus to the Initial Public Offering, it does not appear that Nigerian investors are seriously considering investing significantly in the Ecommerce business. As a matter of fact, about 60.5% of Jumia’s shareholding before going on its first public offering consisted of European nationalities, while South Africa takes a staggering 29.7% of the shareholding at the said time. Even before Konga was acquired by Zinox Group, Kinnevik (Swedish) and Naspers (South African owner of Multi-Choice, M-Net, OLX) had a combined shareholding of 89.4%. Perhaps the fear would lie in the humongous losses sustained by these companies. It’s neither a case of Konga (which recently diverted attention to Reality TV shows) nor Jumia, which has since sought solace in the far away United States, even OLX, a popular classifieds platform for used goods, DealDey, an online discounts platform and Careers24 supported by Naspers, an online jobs marketplace have either reduced their operations or shut down indefinitely.
Whether a new generation of ecommerce boom will happen soon in Nigeria, would depend on the continuing trust from the consumers and expansion on the margins of profits from it.
Charles Rapulu Udoh
Charles Rapulu Udoh is a business writer and lawyer based in Lagos, Nigeria, with proven skills in business writing, analytical reasoning, business development, business law, efficient researching, regulatory compliance, Corporate and business legal issues, Intellectual property law, corporate tax issues. He possesses deep industry knowledge of businesses and how businesses are run, governed and assessed in Nigeria and around the world, especially as it concerns small, medium or large-scale businesses and business owners. He was a Selected Writer, Chimamanda N. Adichie’s Farafina Creative Writing Workshop in 2013 and the 2015 First Prize Winner, Sub-Saharan Africa Entrepreneurship Essay Competition organised by African Liberty Organization for Development, Network For A Free Society, and The Nation Newspaper, Nigeria, for university students across Africa.
Now that “Jumia” goes public at NYSE, how will Nigerians be part of this?
Hi Ezutah,
As you may already know, Nigerians can invest in any stocks in any part of the word. You can do so through these means:
American depositary receipts (ADRs)
Global depositary receipts (GDR)
Direct investing
Mutual funds
Exchange-traded funds
Multinational corporations
However, to avoid complexities, you can use any international mutual fund manager to invest in any part of the world. Investing with small funds may be difficult but investing through a mutual fund would be a lot easier and faster. There are so many mutual funds in Nigeria. Just find one and begin from there.
Thanks a lot, Charles, for the sound response.