Anika Begay
African e-commerce company Jumia will sell 20 million U.S. depositary shares over the next two weeks, TechCrunch has learned. The market transaction is to capitalize on strong results despite a volatile market.
With Jumia’s stock priced at around $5.70 at the stock market open on Tuesday, the e-commerce company could potentially raise around $100 million through its new equity offering. However, the final amount will depend on the stock price, which has since fallen to $4.90. That decline, from around $11 as of Monday following a 200% rally over the past three months, could be attributed to shareholders reacting unfavorably to dilution news, the impact of global carry trades, or both.
This isn’t the first time Jumia has taken this approach. Between 2020 and 2021, the e-tailer raised nearly $600 million through secondary share sales.
CEO Francis Dufay, who is completing his first secondary share sale, said on a call with TechCrunch that Jumia is raising the money this time to accelerate its business after making significant progress in managing costs and improving efficiency.
“The new funding will be used to expand our supply chain network, specifically by enhancing logistics to reach smaller cities and expanding our overall network,” Dufay noted. “We also plan to invest in technology, focusing on marketing and supplier technology, which we believe will have a significant impact on growth. Ultimately, after a lot of deep, fundamental and hard work on costs and efficiency, we believe it is time to move the dial to growth and invest some extra money so we can grow the company faster and go even faster.”
Surpassing the 2 million milestone
Specifically, the funds will enhance Jumia’s cash position, which currently stands at $92.8 million ($45.1 million in cash and cash equivalents and $47.7 million in term deposits and other financial assets) as of its Q2 2024, its most recent financial report. This compares to the platform’s cash position of $120.6 million in Q4 2023 and $101.5 million in Q1 2024.
The funds raised will also be used for other purposes, including customer acquisition, product assortment, supply retention and adding new suppliers to its marketplace.
Jumia’s active customer base has hovered around two million for several quarters. The number represents a 6.0% quarter-over-quarter growth from Q1 2024 and a stable year-over-year growth from Q2 2023 to Q2 2024. “Our customer base is still relatively small, around two million active consumers per quarter, while we work in markets with over 600 million people. So we can do much more on the customer base,” Dufay said.
Subsequently, orders increased 7% year-over-year to 4.8 million. Jumia attributes the growth to its product diversification, another area it plans to double down on with the new capital raised.
However, despite the increase in orders, Jumia’s GMV and revenue declined 5% and 17% year-over-year to $170.1 million and $36.5 million, respectively. As with most of Jumia’s financial reports since new management took over in Q4 2022, a recurring theme has been that these numbers typically show year-over-year improvement on a constant currency basis, but fluctuate in dollar terms due to devaluation. For example, Jumia’s GMV in constant currency grew 35.0% year-over-year, while revenue increased 15%.
“The devaluation that occurred in our two largest potential markets, Egypt and Nigeria, at the end of the first quarter had a significant impact on our revenues quarter-over-quarter,” Dufay said. “However, we have seen some signs of stabilization and a strong narrowing of the spread between the official and parallel market rates. More importantly, our ability to drive constant currency GMV growth demonstrates that our value proposition is working.”
Turning to profitability, Jumia’s adjusted EBITDA loss, which excludes financial costs, decreased 10% to $16.3 million, in line with a reduction in operating loss, which declined 8% year-over-year to $20.2 million, and was primarily driven by cost-saving initiatives.
While Jumia has long used both adjusted EBITDA and operating loss to measure its losses and path to profitability for years, Dufay insisted on the call that the 12-year-old e-commerce platform is more likely to report loss before income tax from continuing operations, which includes financial costs such as the impact of FX and the cost of repatriating cash. Loss before income tax from continuing operations was $22.5 million, down 27% year over year.
“We have emphasized this KPI more in recent quarters due to currency volatility and the associated costs it creates. Reporting the full picture is essential for companies exposed to such volatility. For example, Mercado Libre in Latin America also prefers to look at loss before income taxes rather than EBITDA,” the CEO said. “During their recent earnings call, they highlighted how currency volatility in Argentina impacts financing costs. Therefore, focusing on loss before income taxes provides a more complete view when operating in multiple markets with currency fluctuations.”
