Following months of speculation, Africa’s biggest e-commerce conglomerate, Jumia, will be listed on the New York Stock Exchange (NYSE) later in April.
After filing for an Initial Public Offering (IPO) last month, the company’s share price is set between $13 to $16 and depending on investors’ demand, it could raise up to $216 million.
According to an updated version of its IPO filing with U.S. regulatory body, the digital retailer will offer 13.5 million American depositary shares for sale and if traded at the mid-point of the set price variation, Jumia’s valuation will be fixed at around $1.1 billion.
After setting the price range, the company now has to measure investor interest through a roadshow. The shares are then priced during that process, after which trading will begin within an established trading timeline. Jumia will trade as “JMIA” on the NYSE.
In a private stock sale, Jumia has secured a private investment of $56 million from Mastercard Europe.
The cash injection enables Mastercard to purchase the online retailer’s shares ahead of the much-anticipated listing. However, the shares will be offered at a price determined by investors ahead of the float.
With Mastercard’s expertise and advanced payment technologies, the deal creates a strategic partnership that will improve Jumia’s e-commerce operations and payment solutions in Africa.
According to the Executive Vice President for Corporate Development and Financial Services, Jumia, Sami Louali, the financial services company will provide unparalleled capabilities to help create further awareness about Africa’s booming e-commerce sector. Adding that the deal will also ensure a secure, seamless and reliable payment system for Jumia‘s customers.
The investment also gives Jumia a boost of confidence ahead of an uncertain listing for the company which as categorized as both as an “emerging growth company” and a “foreign private issues” under U.S. securities regulations.
As with most companies ahead of a prospective listing, Jumia’s filing covered several risk factors for investors to consider. But Quartz Africa explained that the risk factors offer just a hint of how costly it is to crack e-commerce across Africa.
With an underserved market of 1.2 billion people, over 400 million active internet users and an emergence of several e-commerce startups, the general outlook for the growth of e-commerce in Africa is positive.
Albeit, the retail market is still largely dominated by “brick and mortar” businesses as the contribution of e-commerce in retail volumes stands at just 1 percent. E-commerce platforms struggle with only a few people depending on them to purchase goods.
“Brick and mortar stores still dominate the commerce industry in Africa but e-commerce is rapidly on the rise,” Louali said, expressing his belief there is an opportunity for growth.
Moreover, Jumia had amassed losses of nearly $1 billion and had negative operating cash flows of $159.2 million, as at the end of 2018. Against a revenue of just $149.6 million, it recorded losses of $195.2 million last year.
But those losses will likely be a familiar – possibly even accepted – trend for investors especially ahead of what’s predicted to be a big IPO year for tech startups with a history of making losses, Quartz Africa notes.