Africa-focused eCommerce company, Jumia, is looking to raise millions of dollars from investors by selling 9 million American depositary shares (ADS) and 18 million ordinary shares. The company made this filing on March 18, 2021.
ADSs are stocks offered by non-US companies, available to be purchased by US investors. Secondary sales like this are usually done by public companies to finance debt or facilitate growth.
Jumia listed the ADSs at $50 per share, but investors could buy these shares at various market prices. This means, if an investor bought the ADSs on March 18, 2021, it may have been for close to $50, but by now, it will be at the current market price of $40.96.
Interestingly, this move comes barely three months after Jumia raised $243 million from $8 million ADSs in December 2020. The shares were sold at an average price of $30 per share, but it initially listed them at $36.8.
Apparently, this latest funding move has been in the works since July 2020.
In July 2020, when Jumia's stock market rally began to show promise, the company filed a document with plans to raise cash by selling up to 18 million ADSs (36 million shares) as often as the company deems fit.
The first batch, which we mentioned helped raise $243m, and when the stock price hit $50, it is, once more, looking to cash out.
The exact amount of funds that would be generated from this sale cannot be determined at this time. If the stocks do not fall below the current price, Jumia could gain anything from $360m to over $400m. If the stocks keep falling before the sale is completed, then the proceeds could be much lower.
Based on the company’s July 2020 records, there's still, at least, 1 million ADSs (2 million ordinary shares) that it could use to raise funds in the future.
The recent sale will dilute current shareholders by almost 10%. This means the earnings per share (EPS) would reduce. However, Jumia reveals that it does not currently pay dividends on its shares.
Despite the huge bet on eCommerce across the globe, Jumia’s fortunes remained a mixed bag in 2020. Its perceived value on the stock market has risen by over 1000% since the pandemic; losses dropped, but so did revenue.
Since Jumia announced the ADSs, its stock has slid 25% from $50 to $40.96 per share as at press time.