In April 2019, the Pan-African ecommerce company, Jumia listed on the New York Stock Exchange.
In an SEC filing at the time, Jumia said it was offering 13,500,000 ADR shares for an opening price spread of $13 to $16 per share, representing 17.6 percent of all company shares. Jumia eventually raised $196 million in that IPO.
A lot has happened in that time; allegations of fraud, a brutal share price crash, a lawsuit that was eventually settled out of court and a repositioning of the company’s business. While the focus was once on selling phones, laptops and other big ticket items, it is now focusing on groceries and everyday household items.
More importantly, Jumia has cut a lot of costs as it wants to reach profitability by 2022. But in the moment, the company has lost $132.5 million in the last three quarters.
Cashing in: According to Jumia’s Q3 2020 financial report, its cash balance stood at $178.4 million. It’s not a bad position to be in, but one thing we’ve seen recently is that when Jumia falls short of investor expectation, its stock prices suffer for it.
So what we’re seeing here is that Jumia is cashing in on its recent stock rally which saw shares close at $31.54 on Friday. It has now sold 7,969,984 ADR shares at an average price of $30.51 per ADS, raising $243.2 million in the process.
It means the company now has more cash and it will be able to survive the pressure if it misses its profitability target of 2022.
For now, the only downside for investors is that earnings per share will be diluted but that’s a short-term problem if Jumia delivers consistent results for the next couple of quarters.