Africa’s Failed Unicorn Jumia Hemorrhages Millions

CBx Vibe:Lost” Frank Ocean

By CultureBanx Team

  • Jumia once valued at $3B, has now been knocked down to $250M
  • It was the first major African tech company to go public on the New York Stock Exchange

A little over a year ago Jumia (JMIA -0.61%), known as the Amazon (AMZN +4.36%) or Alibaba (BABA +2.16%) of Africa became the first major African tech company to go public on the New York Stock Exchange. Since then the struggle has been very real for the e-commerce company that once operated in 14 African countries, and previously held a $3 billion valuation, has now been knocked down to $250 million. It seems like  Jumia’s strategy of prioritizing growth over profits is backfiring.

Why This Matters: The recent exit of Jumia’s earliest major investor Rocket Internet, which sold its 11% stake at the start of the month has given its other investors pause for concern. Mastercard (MA -4.04%) invested $56 million in Jumia’s private stock sale ahead of the IPO, which is now only worth around $5.2 million. Not to mention Citron Research called out the company during its first post-IPO earnings report in 2019, with claims of fraud and “material discrepancies” in its S1 filing. Just a few months later Jumia disclosed it had wrongly inflated its order volume by around $17.5 million due to some fraudulent orders, even though executives stated they had no impact on financial statements.

In Q4 2019, the company lost $66 million, bringing its total operating loss for that year up to $247 million

The e-commerce giant has told investors it has a target of attaining profitability by 2022, which now seems completely out of reach. In Q4 2019, the company lost $66 million, bringing its total operating loss for that year up to $247 million. Investor appetite remains questionable considering the company’s persistent financial losses in its core markets. Jumia has seen its stock price decline steeply down more than 85%.

It wasn’t always gloom and doom for Africa’s former unicorn.There were some things working in Jumia’s favor, as it raised $196 million through its IPO, and on the initial opening day of trading it closed up 75%. Also, the company counted more than 81,000 active merchants and over 4 million active consumers in 2019.

Situational Awareness: Perhaps comparing Jumia to Amazon, or to the likes of Alibaba is a bit mis-guiding, given that the U.S. and Chinese juggernaut at comparable points in time were always more profitable and growing faster than the Pan-African company. Also, Jumia has continued to face an identity crisis since the company was incorporated in Germany, headquartered in Dubai, all while  defining itself as African. This along with its financial issues keeps investors with lingering questions and doubts, one year after this unicorn lost its horn.

CBx Vibe:Lost” Frank Ocean

CONTRIBUTOR

CultureBanx Team

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