Jumia plans to raise over $100 million in secondary shares to boost stalled user growth

African e-commerce company Jumia is selling 20 million American depositary shares in the next few weeks, TechCrunch has learned. The at-the-market deal aims to benefit from strong results despite a volatile market.

Given Jumia’s share price of around $5.70 when the stock market opened Tuesday, the e-commerce company could potentially raise around $100 million through a new share offering. However, the final amount will depend on the share price, which has since fallen to $4.90. The drop, from around $11 on Monday after a 200% gain in the past three months, could be attributed to shareholders reacting negatively to news of dilution, the impact of global carry trades, or both.

This isn’t the first time Jumia has taken this approach. The e-tailer raised almost $600 million from secondary share sales between 2020 and 2021.

CEO Francis Dufay, who is making a secondary share sale for the first time, told TechCrunch that Jumia is raising money this time to accelerate its business, having made significant progress in cost management and efficiency.

“The new funding will be used to expand our supply chain network, specifically by improving logistics to reach smaller cities and expanding our overall network,” Dufay noted. “We also plan to invest in technology, with a focus on marketing and supplier technology, which we believe will significantly drive growth. In short, after some deep, fundamental, hard work on cost and efficiency, we believe it’s time to shift the focus toward growth and invest additional money so we can scale the company faster and achieve even more success.”

Crossing the 2 million mark

Specifically, the funds will improve Jumia’s cash position, which currently stands at $92.8 million (including $45.1 million in cash and cash equivalents and $47.7 million in term deposits and other financial assets) as of Q2 2024, its most recent financial report. This compares to the platform’s liquidity position of $120.6 million in Q4 2023 and $101.5 million in Q1 2024.

The funds raised will also be used for other purposes including customer acquisition, product assortment, maintaining supplies and adding more suppliers to the market offering.

Jumia’s active customer base has hovered around two million for several quarters. The number represents a 6.0% quarter-on-quarter increase compared to Q1 2024 and flat year-on-year growth between Q2 2023 and Q2 2024. “Our customer base is still relatively small, around two million active consumers per quarter, while we operate in markets with over 600 million people. So we can do a lot more in the customer base,” Dufay said.

Orders then rose 7% year-on-year to 4.8 million. Jumia attributes the growth to product diversification, another area it plans to double down on with the capital raised.

However, despite the increase in orders, Jumia’s GMV and revenue fell 5% and 17% year-over-year to $170.1 million and $36.5 million, respectively. As with most of Jumia’s financial reports since new management took over in Q4 2022, a recurring theme has been that the numbers typically highlight year-over-year improvement in constant currency, but fluctuate in dollar terms due to devaluation. For example, Jumia’s GMV in constant currency increased 35.0% year-over-year, while revenue increased 15%.

“The devaluation that occurred in our two largest potential markets, Egypt and Nigeria, at the end of the first quarter had a significant impact on our revenue quarter over quarter,” Dufay said. “However, we saw some signs of stabilization and a sharp narrowing of the spread between official and parallel market rates. More importantly, our ability to drive GMV growth in constant currency shows that our value proposition is working.”

Turning to profitability, Jumia’s adjusted EBITDA loss, which excludes finance charges, narrowed 10% to $16.3 million — in line with an 8% year-on-year decline in its operating loss to $20.2 million — primarily driven by cost-cutting initiatives.

While Jumia has used both adjusted EBITDA and operating loss to measure losses and the path to profitability for years, Dufay insisted on the call that the 12-year-old e-commerce platform is more likely to report a loss before income tax from continuing operations, which includes financial costs such as the impact of FX and the cost of repatriating cash. The loss before income tax from continuing operations was $22.5 million, down 27% year over year.

“We have been emphasizing this KPI more in recent quarters due to currency volatility and related costs. Reporting the full picture is essential for companies exposed to such volatility. For example, Mercado Libre in Latin America also prefers to look at pre-tax loss rather than EBITDA,” the CEO said. “During their recent earnings call, they highlighted how currency volatility in Argentina affects financial costs. Therefore, focusing on pre-tax loss provides a more comprehensive picture when operating in multiple markets with currency fluctuations.”