Jumia, Africa’s first unicorn and largest e-commerce company is selling 9 million American depositary shares (ADS) in a move to raise more cash for its expansion drive. The e-commerce giant whose stock is currently trading at $42.14 at the New York Stock Exchange expects to raise about $400 million from the exercise. This is coming months after it sold almost 7 million shares at an average price of $30.51 per ADS, raising $243.2 million in the process. It is a smart move from the company as it is cashing in on the Bull Run it has enjoyed in the past eight months.

Critics expressed mixed feelings at the move as 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 $177 million, an improvement on the $270 million that it lost in 2019. Observers are of the view that Jumia 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 $361 million despite the fact that it raised money in December.

Read also:Jumia Plans Food Delivery Service Expansion Across Africa

With no clear indication of when the company will become profitable, raising money gives the company runway to survive a few more years without being profitable. Yet, raising money through the secondary sale of shares comes at the cost of diluting shares. The current sales will dilute the current shareholders’ positions by about 10% and Jumia has said the proceeds would be used for general corporate purposes. Yet, shareholders don’t seem impressed with the plan. While shareholders sometimes view secondary offerings as an unusual way to raise money, it is cheaper than debt. Yet, it comes at a cost to the shareholders of lower earnings per share (EPS). 

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry