What happened
Shares of Africa-focused e-commerce start-up Jumia Technologies (JMIA +11.01%) finished trading up 28.2% on January 16, with the biggest catalyst looking like word that the company was making some management changes. That news corresponded to a huge spike in trading and the share price late in the day, resulting in more than 7.6 million shares trading hands. That's seven times higher volume than typical for Jumia.
So what
According to Business Daily Africa and several other news outlets, Jumia has named Kenneth Oyolla as Chief Commercial Officer. According to a Jumia representative, the reports are inaccurate: Oyolla's new role isn't CCO of Jumia, but of subsidiary Jumia Kenya, while his predecessor Diana Owusu-Kyereko was named CEO of Jumia Ghana. This news comes after the company reported after its third quarter that it would take a step back from some markets, in an effort to cut costs so that it could attain profitability more quickly.
Is Jumia stock starting to reverse its losses? Time will tell. Image source: Getty Images.
Now what
Today's big surge probably wasn't entirely related to the hiring of a new executive; Jumia's shares have muddled along near an all-time low since reporting Q3 in November, so it's likely investors were looking for any good news to spark a rally. After all, there's a lot to like about the company, including its first-mover position and scale in Africa's biggest countries, and JumiaPay, its online payment system that could prove as valuable (and maybe more profitable) than e-commerce itself.
With that said, there's still plenty of risk investors should consider. The company has only just started its cost-cutting steps, so it's possible we will see it take a step backwards before the numbers improve. So go the risks of investing in high-growth stocks, particularly recent IPOs.
I'm optimistic the company will turn the corner, but I intend to wait a few quarters to let things play out before deciding what to do next. Now strikes me as a great time to sit on one's hands and let management prove they can turn it around.
Note: An earlier version of this article incorrectly reported Oyalla's role as CCO of Jumia and CEO of Jumia Ghana and has been updated.
