Despite listing on the New Stock Exchange and getting called a fraud by Citron Research and begging to be given one more chance to prove its mettle, Jumia is giving reasons why it listed on the New York Stock Exchange instead of the Nigerian or the more developed Johannesburg Stock Exchange. Here are some of the reasons given by Jumia for this.
Despite listing on the New Stock Exchange and getting called a fraud by Citron Research and begging to be given one more chance to prove its mettle, Jumia is giving reasons why it listed on the New York Stock Exchange instead of the Nigerian or the more developed Johannesburg Stock Exchange. Here are some of the reasons given by Jumia for this.
E-commerce Business in Nigeria and Africa Has No Long-term Investors
Jumia said the first reason why the e-commerce giant had to bypass the Nigerian and other African Stock Exchanges is because e-commerce in Africa has no long term investors. This is why, according to it, it had to explore the American market, where there is deeper understanding of how the market works. In fact, for Jumia Nigeria’s Chief Executive Officer (CEO), Juliet Anammah, Nigerian investors are impatient and can’t wait for long-term returns on their investment. American investors, on the other hand, are prepared to invest and wait for long term returns on investment (RoI).
Konga As A Case Study
Even Citron Research, which cited Jumia for fraud wrote this about Konga, Nigeria’s second leading ecommerce company which has been acquired by Zinox Group.
The divestment of Naspers(a South African company), ‘‘the smartest and largest tech investor in Africa’’ from Konga, another online eCommerce company in Nigeria was not due to a lack of funds or a short-term investment horizon,[after all,] Naspers has $12 billion of cash on the balance sheet and its original investment in Tencent ([in which it] still owns >30%) dates back to 2001… Rather, this decision was a reflection of Naspers’ bearish view on the Nigerian eCommerce market vs. a bullish view on South African eCommerce. Since its Konga exit, Naspers announced plans to invest over $300 million in South African tech businesses,’’ Citron noted.
Of all arguments, the least would be that Naspers divested from Konga not because of a short-term focus. Tencent, which Citron cited, is not notorious for ecommerce business, like Alibaba or Amazon. In fact, Konga was founded in 2012. Naspers acquired 50% equities in Konga in 2013, a year after Konga was formed, and finally divested in 2018, a space of five years. This does not disclose a longer term investment of say, 10 years.
E-commerce Platforms Are Not Reputed To Make Profit In The Short Term
Another reason given why e-commerce business have issues with investors is that it hardly makes profit in the short-term.
Anammah said e-commerce platforms are not reputed to make profit in the short term, stressing that investors in Alibaba had to wait for long term Return on Investment.
Amazon As A Case Study:
It took Amazon, the global leading online retailer as a public company to make profit. The company first reported a quarterly profit in the fourth quarter of 2001 and at $5 million, which may not be too attractive for investors. It did not come as a surprise that towards the end of 2017, Amazon reported a whopping $1.86 billion in net income. This does not seem to bother Amazon CEO Jeff Bezos whose cardinal business objective was to sustain more investment for the future growth of the company.
Much of Amazon’s profit was bolstered by the US tax cut, which added about $790 million to its profit in accounting terms. Take that away, it would have taken Amazon a longer time to make profit.
So When Will African E-commerce Companies Consider Listing In Their Countries?
Jumia Nigeria’s CEO Anamma said listing on the African Stock Exchange would take would not take a much longer time than expected. Jumia said this may happen soon, by 2022 when investors must have understood the dynamics of the industry.
Jumia Finally Comes Hard On Citron
Anammah said Jumia is seriously considering launching a legal battle against Citron Research which released a controversial report recently.
“We are looking at it (taking legal action). The board is looking at it. Some recent allegations were made about Jumia on the basis of selected, biased or unverified facts with what appears to be a clear objective of damaging Jumia. We held our earnings call on Monday May 13th and we published our first quarter results, which we are very pleased with, and provided information to demonstrate those recent allegations are wrong, ’’ Juliet Anammah said.
Jumia, on April 12 2019, became the first African tech stock to list on Wall Street and its shares soared as analysts branded it the ‘Amazon or Alibaba of Africa’. But the shares fell sharply after Citron Research’s publication which questioned some of Jumia’s sales figures and accused the firm of fraud. The shares have since rebounded.
Charles Rapulu Udoh
Charles Rapulu Udoh, a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.