Jumia Technologies, the African e-commerce company, has filed for an unusual initial public offering (IPO) on the New York Stock Exchange (NYSE) weeks after its largest shareholder, MTN Group Limited, said it will divest its stakes.
Jumia said it intends to take advantage of the growth of e-commerce in Africa to attract public investment. The public listing will enable Jumia to raise funds and boost awareness as Internet access and smartphone use increases.
According to information obtained from the filing that was made on Tuesday, Jumia will trade under JMIA on the NYSE and would be valued at about $1.5 billion.
“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,” jumia said in the filing.
Morgan Stanley, Citigroup Inc., Berenberg and RBC Capital Markets will advise and assist Jumia during the public listing.
Not your usual IPO
The public listing by Jumia is not the traditional IPO. It is an American Depositary Receipt (ADR), and the individual shares are referred to as American depositary shares (ADS). ADS is a U.S. dollar-denominated equity share of a foreign-based company available for purchase on an American stock exchange. ADSs are issued by depository banks in the U.S. under an agreement with the issuing foreign company.
Benefits of ADS
ADS provides a wider investor base, as well as lower costs of future capital for Jumia. ADS also negates currency conversions and dealing with other cross-border administrative regulations for U.S. investors willing to invest in foreign companies.
Downside of ADS
ADSs are burdened by currency risk. Price of shares and any income payments can be affected by fluctuations in the currency exchange rate between the US currency and the foreign currency.
Ignoring the Nigerian market
Jumia‘s listing on the New York Stock Exchange comes at a time its largest shareholder, MTN Group, is considering listing on the Nigerian Stock Exchange. Jumia’s move to list on NYSE may be considered as a snub to NSE and Nigerians, the country that is largely linked to the success story and growth of Jumia in Africa.
Jumia‘s IPO-type excludes any Nigerian investor from participating in the purchase of the e-commerce firm’s shares. Stakes in Jumia is only available to American investors for now.
As stated in its filing, the e-commerce company is looking to attract investors, and with its listing on NYSE, it’s easy to predict the kind of investors Jumia is seeking. But Jumia wouldn’t be the first to list outside the Nigerian market despite owning most of its earnings in Nigeria. MTN concluded listing on NSE 18-years after launching in Nigeria – and it wasn’t willingly.
MTN Group considers selling Jumia shares
MTN Group is the largest shareholder in Jumia Technologies, and the telecoms company plans to sell shares through Jumia’s IPO to raise $600 million intended for debt payment.
At its full-year earnings presentation last week, MTN identified Jumia as one of a number of e-commerce assets that could be sold as part of a 15 billion rand ($1bn) asset-disposal plan. It was also reported that the network operator is also looking for buyers for flight-booking site, Travelstart-co.za.
MTN Group currently holds 40 per cent stake in Jumia which is arguably Africa’s biggest online retailer. The company is present in about 14 African countries, including Nigeria where it is in competition with Konga and other smaller e-commerce operators.
Other Jumia shareholders include: Goldman Sachs Group Inc., Millicom International Cellular SA, Orange SA and Africa Internet Group, a venture backed by Goldman, MTN and Rocket Internet SE.