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Why Jumia Technologies Stock Was Sliding Today

By Jeremy Bowman - Mar 18, 2021 at 1:38PM

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A secondary offering cooled off shares of the African e-commerce company.

What happened

Shares of Jumia Technologies (JMIA -9.28%) were pulling back today after the African e-commerce company filed a secondary stock offering and as high-priced tech stocks pulled back broadly as treasury yields rose, weighing on growth stock valuations. 

As of 12:50 p.m. EDT, Jumia shares were down 13.5%, while the Nasdaq Composite was off 1.5%.

A Jumia delivery man on a motorbike

Image source: Jumia.

So what

In a filing this morning, Jumia said it would sell nearly 9 million American depositary shares, which are valued at close to $400 million at the current stock price. That would dilute current shareholders by about 10%. Jumia said the proceeds would be used for general corporate purposes.

Jumia, the leading e-commerce company in Africa, is still in the cash-burning stage as it is building out infrastructure in a number of countries in Africa, posting a free-cash-flow loss of 100 million euros last year. The company has been pivoting away from a first-party direct-seller model to a marketplace one, which has led to a decline in revenue but has also narrowed losses. Jumia has made getting to breakeven its primary goal.

In 2020, Jumia's gross profit rose by 22% to 92.8 million euros, and it narrowed its adjusted EBITDA loss by 35% to 119.6 million euros. However, revenue declined by 13% to 139.6 million, showing the company is still deeply unprofitable.

Now what

Jumia's stock price has soared over the last year as e-commerce stocks have caught fire with investors due to the impact of the pandemic. However, Jumia still has a lot of investment ahead of it as Africa has been mostly ignored by larger e-commerce companies due to a lack of infrastructure. That means it will likely take years for the business to scale. However, if it's successful the stock has a lot of upside potential as its market cap is only about $4 billion.

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