Why is MTN Dumping Its Jumia Shares?

MTN is looking to bail out of its position in Nigerian eCommerce unicorn Jumia. The key question is, why? The simple answer appears to be that MTN wants to take advantage of Jumia’s surging share price to cash out and apply the proceeds to debt reduction, marketing expansion, and other corporate priorities. 

Smart Move by MTN?

MTN’s stake in Jumia is worth an estimated $243 million. Will Jumia’s value rise further and leave MTN regretting its exit? Hard to say. But while Jumia’s potential is enormous, so are its challenges. 

Jumia launched in 2013 as Jumia Market, a kind of eBay clone, initially operating in Nigeria and Pakistan. It has since evolved into an online store akin to Amazon serving 11 markets throughout Africa. 

The company has had its struggles and controversies. It has pulled out of some markets, including Cameroon. And it has consistently failed to hit investor targets. 

Notably, it has had enormous challenges with managing the logistics of delivering packages to African homes and businesses, often with missing and inaccurate addresses and other challenges. 

Since going public Jumia went public in April 2019. The company’s stock opened at 14.50, raising $196 million off the bat. After a rough 2019, in which the stop ended the year down 55% from its initial price, the stock has rallied in 2020. 

Jumia opened the year at 6.60, and the stock has since climbed 192% to close on 7 August at 19.26. 

The company, which continued to make large losses, has even become a target of short sellers, who labeled the stock a “fraud.” This year’s rally may mute the short seller’s influence for now. But the question remains, is Jumia a good long term investment. The coronavirus crisis appears to have played a major role in the stock’s 2020 rally as eCommerce usage in Africa has skyrocketed. 

Jumia seized the opportunity the virus presented. It expanded grocery and sanitary offerings, for example. It also introduced contactless delivery options and promoted cashless payments. It also leveraged its online retail subsidiary Zando to begin selling essential items in South Africa. Will COVID ultimately put Jumia on a long term path to success? MTN seems to be betting the answer is no.

New Kid on the Block

Meanwhile, another Nigerian eCommerce startup has set its sights on an IPO, perhaps mindful of Jumia’s recent success. 

Konga was founded in Lagos in 2012 by Sim Shagaya. The company was acquired in 2018 by Zinox. Konga’s current CEO is Nick Imudia.

Since that acquisition, Konga has invested a reported 120 million US to improve its operations. The company has reportedly cut its monthly losses from NGN 400 million down to NGN 100 million.


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