Shares of Jumia Technologies (JMIA 6.08%) were sliding today on concerns that tomorrow's lockup expiration could lead to a sell-off in the stock as insiders get their first chance to sell shares of the newly public company. The end of the lockup period, which traditionally comes 180 days after an IPO, is often a closely watched test for a new stock as it shows if early investors believe in the company's long-term value.
As of 2:36 p.m. EDT, the stock was down 8.1%.
There's no question that Jumia, the biggest e-commerce company in Africa, has disappointed in its first six months. The stock debuted at $14.50 and jumped out of the gate, rising all the way to $49.77 a share less than a week after the IPO, benefiting from comparisons to Amazon and MercadoLibre, two e-commerce stocks that have soared in recent years.
However, shares have steadily fallen since then on valuation concerns, widening losses, an attack from a short-seller, and the company's own admission of improper sales practices, or what basically amounts to fraud on the part of some of its JForce sales representatives. Meanwhile, Jumia is also the target of a lawsuit regarding alleged misstatements in its IPO.
Against that backdrop, it's easy to see why there's some nervousness about the lockup period expiring tomorrow.
As the e-commerce leader in Africa, Jumia has plenty of promise, but its early months on the public markets make it clear that the company faces serious challenges, including financial losses, corruption, and the difficulty of operating an e-commerce business in a region where infrastructure is poor and many residents don't even have a street address.
Investors should pay attention to the stock's behavior tomorrow as insiders get an opportunity to sell, but the silver lining on the stock's recent collapse might be that, at this point, it isn't worth it for insiders to dump the stock.