Jumia’s planned NYSE listing offers exit window for investors in the loss-making venture

A document from the U.S. Securities and Exchange Commission (SEC) revealed that one of Africa’s leading e-commerce platforms, Jumia on Tuesday, March 12, 2019, filed to launch its initial public offering (IPO) on the New York Stock Exchange (NYSE). This announcement could mark a possible exit by the major investors in loss-making Jumia, especially Rocket Internet.

It would be recalled that about a year ago, Rocket internet announced that it was going to list Jumia either on the London Stock exchange or Frankfurt Stock exchange. However, none of the listings saw the light of day.

Although the date for the NYSE listing has not been confirmed, the minimum SEC timeline for beginning sales activities is 15 days after submitting first documents. Jumia will present as a German company, having registered the company as Jumia Technologies AG in Berlin, Germany, on January 31, 2019.

Floating an IPO is not new with Venture Capital (VC) businesses as this is one of the strategies of exiting a business. It gives access to liquidity when investors are seeking returns or refunds earlier than anticipated. With this listing, investors in the company will have the options to sell some of their shares as part of the offering, giving them an exit opportunity.

An IPO could offer Rocket Internet a full exit from Jumia, by divesting its remaining 28 percent stake. Jumia which has expanded to 14 African countries since its launch in 2012 haven been backed with over $700 million from investors which include Africa’s largest mobile operator MTN and French insurance company AXA.

If Rocket Internet exits Jumia through a NYSE listing, it would be in line with its strategy of selling or listing established internet firms. In 2017, Rocket Internet floated online food groups Delivery Hero and HelloFresh. It also floated its online furniture retailer Home24 last year.

As expected by law, Jumia declared its losses in the Registration Statement submitted to SEC, as well as the risks the company faces that might make profitability far-fetched. The company recorded €120.1 million ($135.83 million) loss in 2017, €91.9 million ($103.92 million) loss in 2016 and €161.3 million ($182.30 million) loss in 2015. Jumia cited the continued losses as a lack of guarantee that it will “achieve or sustain profitability” or “pay any cash dividends” in the foreseeable future as part of its “Risk Factors” for potential investors.

However, with its understanding of the African market, the venture builder might stay a while longer until, it can get adequate value for its investment in Jumia.

“We intend to benefit from the expected growth of e-commerce in Africa through the investments that we have made and the extensive local expertise that we have developed since our founding in 2012. Through our operations, we have developed a deep understanding of the economic, technical, geographic and cultural complexities that are unique to Africa, and which vary from country to country,” Jumia said in the registration statement.