TechCrunch has learned that African e-commerce company Jumia is selling 20 million American Depositary Shares in the coming weeks. The market transaction is intended to capitalize on its strong performance despite volatile markets.
Jumia’s stock price was around $5.70 when the stock market opened Tuesday, suggesting the e-commerce company could raise around $100 million through a new share offering. The final amount, however, depends on the stock price, which has since fallen to $4.90. The decline, which was around $11 as of Monday after rising 200% over the past three months, could be due to shareholders reacting negatively to the dilution news, the impact of the global carry trade, or both.
This isn’t the first time Jumia has taken this approach: Between 2020 and 2021, the e-tailer raised about $600 million through secondary share sales.
Jumia CEO Francis Dufay, who is conducting the first secondary stock sale, told TechCrunch in a call that the company is raising the funds to accelerate its business after making significant progress in cost management and efficiency.
“The new funds will be used to expand our supply chain network, particularly to improve logistics to reach smaller cities, and to expand our overall network,” Dufay said. “We also plan to invest in technology, with a focus on marketing and supplier technology, which we believe will have a significant impact on our growth. Ultimately, after a deep, fundamental and arduous effort on cost and efficiency, we believe this is the right time to move the cursor to growth and invest additional funds to scale the company faster and reach break-even sooner.”
Exceeded 2 million units
Specifically, the funds will improve Jumia’s cash position, which currently stands at $92.8 million ($45.1 million in cash and cash equivalents, $47.7 million in term deposits and other financial assets) as of Q2 2024 (its most recent financial report). This compares to the platform’s liquidity position of $120.6 million in Q4 2023 and $101.5 million in Q1 2024.
Funds raised will also be used for other purposes, including customer acquisition, product assortment, maintenance of supply, and adding suppliers to the marketplace.
Jumia’s active customer base has remained around 2 million for several quarters. This represents a quarterly growth rate of 6.0% over Q1 2024, and flat year-on-year growth between Q2 2023 and Q2 2024. “While our customer base is still relatively small, at around 2 million active consumers per quarter, we are operating in a market of over 600 million people, so we can do a lot more with our customer base,” Dufay said.
Since then, orders have grown 7% year-on-year to 4.8 million. Jumia attributes the growth to diversifying its product range, another area it plans to double down on with the new capital it raised.
However, despite the increase in orders, Jumia’s GMV and revenue were down 5% and 17% year-over-year, respectively, to $170.1 million and $36.5 million. As with most of Jumia’s financial reports, a recurring theme since new management took over in Q4 2022 is that these figures typically highlight year-over-year improvements in constant currency, but fluctuate in dollar terms due to devaluations. For example, Jumia’s GMV in constant currency grew 35.0% year-over-year, while revenue grew 15%.
“The devaluations that occurred in our two largest potential markets, Egypt and Nigeria, at the end of Q1 had a significant impact on our quarterly revenue,” Dufay said. “However, we have seen signs of stabilization and a sharp reduction in the spread between the official and parallel market rates. More importantly, our ability to drive GMV growth at fixed rates demonstrates that our value proposition is working.”
Turning to profitability, Jumia’s adjusted EBITDA loss excluding financial costs was down 10% to $16.3 million, which was consistent with an 8% year-over-year decline in operating loss to $20.2 million, largely driven by cost-cutting initiatives.
Jumia has for years used both adjusted EBITDA and operating loss to measure its path to loss and profitability, but Dufay argued that the 12-year-old e-commerce platform is more aggressive in reporting loss before income tax from continuing operations, which includes foreign exchange impacts and financial costs such as cash repatriation costs. Loss before income tax from continuing operations fell 27% year-on-year to $22.5 million.
“We placed more emphasis on this KPI in the last quarter due to the volatility of exchange rates and the associated costs that come with them. It is essential for companies exposed to such volatility to report the full picture. For example, Mercado Libre in Latin America also prefers to look at loss before income tax rather than EBITDA,” the CEO said. “In their recent earnings call, they highlighted how exchange rate volatility in Argentina impacts their finance costs. Therefore, when operating in multiple markets with volatile exchange rates, focusing on loss before income tax provides a more comprehensive view.”
