Jumia Insiders Get First Chance to Cut Losses
Jumia Insiders Get First Chance to Cut Losses
(Bloomberg) -- Early investors in Jumia Technologies AG including MTN Group Ltd. and Goldman Sachs Group Inc. face a stark choice: Cash out or stick with the Africa-focused e-commerce group after a troubled six months.
MTN, Africa’s biggest wireless carrier, led investors backing the Berlin-based company ahead of an initial public offering in New York in April. German startup incubator Rocket Internet SE, French drinks maker Pernod Ricard SA, Goldman and Mastercard Inc. also bought stakes. All are likely to have been prevented from selling stock for 180 days, according to a lock-in clause that expires on Wednesday.
While investors initially jumped at the chance to back the so-called Amazon of Africa, a damaging short-seller’s report by Citron Research turned sentiment. The shares are now down almost 50% from its listing price.
That means the lockup expiry may not have much of an impact on the share price, according to Nirgunan Tiruchelvam, an analyst at Tellimer Markets, who initiated on the stock with a ‘radical sell’ in July this year. “The investors are carrying massive losses from the IPO. I don’t see many of them heading for the door,” he said.
MTN, the biggest investor in Jumia, had planned to sell its stake after the six-month lock-up in an effort to scale back on e-commerce investments, people familiar with the matter said in April, before Citron released its report. The Johannesburg-based company will give an update alongside a trading statement on Oct. 31, a spokeswoman said.
The Citron report labeled Jumia “the worst abuse of the IPO system since the Chinese RTO fraud boom almost a decade ago” and “an obvious fraud.”
Other concerns include the burning of cash, a high level of failed deliveries and improper transactions at its Nigeria business, while co-founder and Chief Executive Officer Sacha Poignonnec has said losses will continue until 2022.
With the equity lockup expiring, analysts are looking for reassurance. “We expect the company to deplete its cash balance in about 2-3 years,” said Tiruchelvam. The company needs to show conviction on corporate governance concerns, fraud revelations and the pathway to cash flow profitability, he said.
Jumia declined to comment. The shares fell a further 9.3% to $7.58 as of 11.13 a.m. in New York, in a market spooked by trade tensions between the U.S. and China.
--With assistance from Crystal Kim and Loni Prinsloo.
To contact the reporter on this story: Anisha Sircar in New York at asircar@bloomberg.net
To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, John Bowker, Molly Schuetz
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