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Jumia: Africa’s Amazon’s huge losses since a billion-dollar IPO – Quartz

A year ago this week, Jumia, the largest e-commerce operator across Africa, entered uncharted territory: it became the first major African-focused tech company to list on the New York Stock Exchange (NYSE).

Jumia’s listing was rightly heralded as a major milestone for Africa’s fledgling tech ecosystems and for a company which had expanded to 14 African countries with businesses across several verticals since it was first founded in Nigeria in 2012.

Ahead of its listing, investors with a track record of backing e-commerce ventures in emerging markets predicted that the novelty of an Africa-focused tech company listing on NYSE would initially prove a draw, especially among retail investors. And that turned out to be the case in the company’s first days of trading. Jumia went on to raise $196 million through its initial public offering (IPO) and its stock soared on its opening day of trading, closing 75% up valuing the company at over $3 billion.

But one year later, those fortunes have changed drastically.

After peaking at a high of $49.77 within its first week of trading in April 2019, the stock had crashed below its IPO price by August. Jumia lost its “unicorn” status by September and the stock now trades just over $3 or around $250 million in market capitalization.

That initial Cinderella run was the result of “a confluence of market conditions, a scarcity of this kind of opportunity [an African tech company listing in New York] and a lack of interrogation because they were so many reputable anchor investors already in the business,” says Aly-Khan Satchu, a Nairobi-based financial and investment analyst. Those investors included Africa’s largest telecoms operator MTN, French insurance giant AXA and Swedish telecoms operator Millicom. Global payments giant Mastercard also invested $56 million in a private stock sale ahead of the IPO.

Jumia also benefited from a “positive spillover effect” with other high-profile tech IPOs also slated for last year, from Uber and Lyft to AirBnB and Slack, Satchu argues. “That point in time was about peak optimism about these [tech] opportunities.”

Road bumps

Jumia’s first PR battle amid its IPO came in form of a debate over its identity. Despite being incorporated in Germany, listed in New York and headquartered in Dubai, Jumia’s definition of itself as African in its S1 filing prompted intense scrutiny from African industry insiders. As Jumia CEO and co-founder, Sacha Poignonnec, told Quartz Africa at the time, the company’s identity stems from its focus “to bring some value to the African consumers.”

NYSE

Sacha Poignonnec (L) and Jeremy Hodara (R), co-founders of Jumia.

But while that debate was more about nuance, subsequent concerns around Jumia were more about substance.

The company’s first post-IPO earnings call came on the heels of damaging allegations of fraud and “material discrepancies” in its S1 filing by Citron Research, a small, controversial Los Angeles-based stock short seller. Those claims were brushed off by the company’s leadership which maintained operations were “transparent” even as its share price tumbled.

Four months later however, the claims of fraud came from within the company itself as Jumia disclosed it had uncovered instances of improper orders being placed and subsequently cancelled on its marketplace platform. Jumia claimed the fraudulent orders had no impact on its financial statements even though they had wrongly inflated its order volume by around $17.5 million.

Further, the company also revealed “several” class action lawsuits had been filed against it over “alleged misstatements and omissions” in its launch prospectus—a core claim by Citron Research.

Pursuing profits

Jumia has told investors it has a target of attaining profitability by 2022. It is still reporting major million-dollar quarterly losses but not trending towards reducing losses.

In the fourth quarter of 2019, operating losses expanded by 15% to €61.1 million ($66.5 million) year-on-year while full year operating losses widened by 34%. While Jumia has now stepped up cost-cutting measures, shutting down operations in Rwanda, Tanzania and Cameroon in the last six months, it has also doubled down on its existing markets, exploring ways to widen its user base, order numbers and revenue. Last July, it partnered with Vivo Energy (owner of Engen and Shell-branded petrol stations across Africa) to set up pick-up stations at Vivo’s over 2,000 fuel station outlets, allowing customers place and pick up orders as well as make payments. In addition to easing last-mile delivery challenges, the move also aimed at capturing and on-boarding potential offline customers as well.

 

But while it continues to tweak its e-commerce and marketplace models, Jumia is also betting on a fintech pivot to drive up revenues. After months of testing and using Jumia Pay, its in-house payments solution, within its marketplace ecosystem, Jumia has stepped up plans to spin off the service and open it up to third party users. The service which is now live in six African countries has already shown promise with payments volume and value more than doubling last year, according to Jumia’s financial statements.  In addition to payment processing for third party users, Jumia Pay’s off-platform strategy also includes facilitating payments through QR codes as well as powering mobile point of sale systems.

But competing in Africa’s  already crowded fintech space presents Jumia with a new set of challenges—and deep-pocketed rivals. In Nigeria, for instance, payments services OPay and PalmPay received over $210 million in funding predominantly from Chinese backers last year alone.

It’s yet unclear if or when Jumia’s long-term bet and investment in African e-commerce will pay off for investors. But one exit possibility could come in form an acquisition by a global e-commerce player, Satchu claims. “They do have a first mover advantage and with these sort of valuations, it might be attractive for a bigger player to scoop them up as a quick market entry point.” It’s an oft-cited exit theory among local industry insiders.

But while that may yet be the case, the recent exit of Jumia’s earliest major investor Rocket Internet, which sold its 11% stake at the start of the month, may prompt watchers to do a double take.

“The valuation around which they got out was not a stellar one and therefore counter-intuitively, the message they’re sending is that ‘we’re prepared to take what we get now rather than hang on for the business to right-size itself’,” Satchu says. ”It was a very negative signal that one for their earliest investors is prepared to cash out and run.”

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How To Be Ready To Go Public Following The COVID-19 IPO Pause – Forbes

By now, we’re all surely tired of being besieged constantly by the barrage of reports on the unprecedented disruption and carnage created by the Coronavirus Disease 2019 (COVID-19). With an economic toll that has been nothing short of calamitous, the pandemic has slowed or paused the pace of IPOs (or, at least, the pricing of IPOs). A number of high-profile companies were poised to enter the public debt and equity markets in 2020; however, the market’s volatility across all industries has altered the time horizon for most, if not all, of these offerings. The conventional wisdom is that there will be a cooling-off period, even after markets stabilize, before many companies are confident enough in the markets and in their expected exit valuations to price an IPO.  

This pause is easy to understand. Historical trends show that IPO activity typically accelerates in a rising market when investor demand is high for a given industry or company profile. But it slows in a down market when investors tend to be more cautious and circumspect. Needless to say, COVID-19 has created a down market deep into bear territory.

But the sun will rise again. And when it does, more IPO candidates typically emerge. That is why companies considering going public should assess their timeline and readiness to move when opportunities arise. Interestingly, three IPOs – a cloud software solutions provider and two pharmaceuticals – have priced on the Nasdaq over the last two weeks. Even in the midst of all of this turmoil in the markets, a few companies have still found market interest and successfully priced their IPOs.

Public company readiness is an endeavor requiring significant time, effort and attention across the organization. The three suggestions below frame the proper mindset for the CFO in approaching readiness for an IPO coming out of the COVID-19 crisis.

Get and Stay Ready

The entire IPO process, including the preparation of people, processes and technology for life as a public company, typically requires 12 to 24 months. With so much uncertainty in the IPO market these days, preparation is key to ensuring that companies are primed to take advantage of favorable market conditions when they ultimately emerge. If the organization is considering a public offering in 2020 or 2021, there are fundamental things the finance function should be doing to ensure readiness:

  • Get finance and accounting processes and documentation in the best possible shape. Focus on maturing accounting and reporting processes and having competent resources in place who can refresh financials within a reasonable time after a period close.
  • Apply learnings from temporary transitions during the COVID-19 crisis. Transitions to a remote workplace, whether voluntarily or mandated by the authorities, may provide insights as to the intelligent use of technology to improve finance processes.
  • Study recent IPOs within the company’s peer and industry group, including recent SEC inquiry trends. Review the questions and responses posted on the U.S. Securities and Exchange Commission (SEC) website (after your peer’s IPO “goes effective”), as well as overall trends, to learn from mistakes and make necessary improvements. Learn from recent filers’ augmented risk factors, management discussion and analysis (MD&A) disclosures, and other new disclosures during your readiness process.  
  • Assess and upgrade accounting and reporting systems and processes and build your talent pool. Make sure the bench strength is in place to survive and thrive under public scrutiny. Consider monthly or quarterly full financial reporting, for example, as an exercise to test the team’s readiness to produce timely and reliable interim results.

Prepare a Project Plan

The typical IPO readiness plan can be a year or two in the making. There are internal controls that must be considered, legal and audit considerations, and even disclosures about non-financial reporting matters such as cybersecurity as well as risk factors on emerging issues, including potential catastrophic events and certain critical forward-looking information. These are key steps that need to be coordinated and properly timed. In many cases, the organization may need to hire executives with public company management experience to guide the process. Forget about doing these things at the last minute. It doesn’t work.

A good project plan begins with a baseline understanding of the current state of the company and serves as a roadmap for getting the company from where it is to where it should be for a successful transition to being a public company. Baselining begins with assessing the following:

  • Current state of readiness against benchmarks related to policies, processes, people, reporting, methodologies, and systems and data requirements
  • Readiness for core public company requirements, such as reliable financial reporting, efficient financial close, corporate governance, compliance with Sarbanes-Oxley requirements, and IT sufficiency and scalability
  • Prioritization based on the urgency of solutions needed to close identified significant risks or gaps based on costs and benefits
  • Sufficiency of work plans, timeline and resource requirements to implement the solutions

With a good baseline understanding, finance executives should be able to answer the following questions:

  • Can we meet the reporting timelines and guidelines required by the SEC or other regulators?
  • Can we handle the complex accounting and disclosure requirements applicable to our industry?
  • Is our IT infrastructure sufficiently scalable to handle our expected growth?
  • Does the data used to manage and report our financial results have integrity? How do we know?
  • Do we understand how we must prepare to comply with the Sarbanes-Oxley internal control reporting requirements, as well as internal control requirements in other jurisdictions in which the company operates?
  • Will any unfavorable findings resulting from the audit of the previous three years of financial information have a negative impact on the timing of a public offering?

Additionally, companies must ask themselves whether they have the internal bandwidth, crisis operational resiliency (particularly for international operations), technical acumen and subject-matter expertise to navigate an IPO transition. Often, the correct answer lies in seeking the right combination of outside resources and expertise to augment existing capabilities.

Start Acting Like a Public Company Now

Depending on the timeline, begin acting like a public company before you are one. There’s a big difference between thinking you are prepared and knowing it. Pre-IPO organizations should have their “public ready” management and board governance teams in place months in advance, with strong players in key positions, including finance, legal and internal audit. Reporting infrastructure should be in place and tested with several quarters of dry-run financial statements and disclosures. This approach breeds a public company consciousness among employees and engenders confidence that everyone understands what actions and behaviors are expected and prohibited.

The Final Word

Who knows how long the COVID-19 downturn, and related IPO pause, will last? A month? A quarter? More? Even if an IPO is postponed or withdrawn prior to filing due to market conditions, companies need to be ready to initially file or refresh their registration statements when the market opportunities open up. By getting ready to operate as if the company were already public prior to actually going public, companies can wait for the right window of opportunity with confidence, knowing they are poised and ready to take full advantage of their readiness.

In closing, I hope all of us are doing our part to abide by established public health protocols. We are the front line in this savage war against COVID-19. If we do our small part, there will be less pressure on the brave health professionals and first responders who occupy the final line of defense in saving lives. Our contribution is within the sanctity and privacy of our homes and local communities and is expressed through the exercise of common sense. Their contribution is within the confines of a real battlefield and is expressed through courage of the highest order amid human suffering and death. Let us all show our gratitude to them by doing our very small part in this struggle against our common enemy.

Full coverage and live updates on the Coronavirus

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Here’s How Much Investing $100 In The 2013 America Airlines IPO Would Be Worth Today – Benzinga

Investors who owned stocks in the 2010s generally experienced some big gains. In fact, the SPDR S&P 500 (NYSE: SPY) total return for the decade was 250.5%. But there’s no question some big-name stocks did much better than others along the way.

American’s Big Decade

One disastrous investment of the last decade was U.S. airline American Airlines Group Inc (NASDAQ: AAL).

American Airlines kicked off the 2010s with news of its parent company AMR declaring bankruptcy on Nov. 29, 2011. With its stock trading under $1 per share, American was delisted from the NYSE in January 2012. So $100 of American Airlines stock purchased in 2010 would be worth $0 today.

However, after merging with the former U.S. Airways, American emerged from bankruptcy and held an IPO in 2013, selling shares of the new stock for $25.

New American shares made it above $50 for the first time in early 2015 and climbed as high as $56.20 before losing altitude once again. American dropped back to $24.85 by mid-2016 before the stock got a major lift from a big-name investor.

In late 2016, Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) took a new stake in American, sending the stock to its highest point of the decade shortly thereafter.

See Also: Here’s How Much Investing $100 In Boeing Stock Back In 2010 Would Be Worth Today

2020 And Beyond

American reached its decade high of $59.08 in early 2018.

Unfortunately, the stock has taken a nosedive thanks to COVID-19, dropping to a new all-time low of $9.09 before bouncing back to around $12.

Given the recent sell-off, $100 worth of American IPO stock in 2013 would be worth about $47 today.

Looking ahead, analysts are optimistic American can regain its footing in 2020. The average price target among the 16 analysts covering the stock is $13, suggesting 11% upside from current levels.

© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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If You Invested $10,000 in Guardant Health’s IPO, This Is How Much Money You’d Have Now – The Motley Fool

Certain stocks have an X factor. When they arrive on the scene, investors flock to them. Why? It’s usually because there’s a perception that the companies are on to something big. Investors scoop up shares because of a fear of missing out.

Guardant Health (NASDAQ:GH) definitely has such an X factor. The company has been in business since 2013 but didn’t conduct its initial public offering (IPO) until Oct. 4, 2018. Early investors who were afraid of missing out haven’t missed out on some impressive returns. Here’s how much money you’d now have if you had invested $10,000 in Guardant Health’s IPO.

Image source: Getty Images.

A fantastic performance even with the recent decline

Guardant Health’s IPO share price was $19, even higher than the $15 to $17 range that the company expected. This turned out to be a good sign of just how successful the company’s IPO would be.

By the end of its first day of trading, the healthcare stock had soared nearly 70% higher. Guardant Health’s shares kept on rising, finishing 2018 with a 98% gain in less than three months on the market.

During 2019, Guardant Health’s share price more than doubled. The stock closed at an all-time high on Feb. 21, 2020. At that point, an initial investment of $10,000 in Guardant Health’s IPO would have been worth $46,714.

Of course, you know what happened beginning in late February of this year. The stock market plunged as the novel coronavirus and the disease that it causes, COVID-19, spread across the world. Guardant Health’s shares sank as much as 34% off the highs from earlier in the year before rebounding.

So how much would that $10,000 investment in the company’s IPO be worth now? Nearly $36,250. The initial investment has delivered a return of over 360% in less than 20 months. That’s still a fantastic performance even with the recent coronavirus-fueled decline.

How Guardant Health did it

Guardant Health delivered these tremendous gains the old-fashioned way. The company topped Wall Street’s estimates quarter in and quarter out.

The key to this success was the skyrocketing demand for Guardant Health’s two liquid biopsy products, Guardant360 and GuardantOMNI. Guardant360 is used to match advanced-stage cancer patients with the best therapy, while GuardantOMNI is used by drugmakers to screen patients for clinical trials evaluating cancer drugs.

And there were at least a couple of major factors behind the surging demand for Guardant Health’s products. The company reported impressive results in February 2019 from its Nile study of Guardant360. This study pitted Guardant Health’s liquid biopsy against standard-of-care tissue testing in detecting key biomarkers in patients with advanced non-small-cell lung cancer (NSCLC). Guardant360 came out on top.

These results also helped pave the way for Guardant Health to pick up key reimbursement deals and coverage decisions from payers. One of the most important of these was the decision by Palmetto GBA to make Guardant360 the first (and, so far, only) liquid biopsy to receive broad coverage for use in most types of advanced solid tumors.

Bigger and better things ahead

Is it too late to make a lot of money by investing in Guardant Health? I don’t think so. 

Guardant Health thinks that its Guardant360 liquid biopsy has a $6 billion addressable annual market in the U.S. alone. By comparison, the company’s total revenue last year was $214.4 million. 

An even greater opportunity for Guardant Health, though, lies with its LUNAR liquid biopsies, which are currently available for research use only. LUNAR-1 targets the detection of cancer recurrence in patients and helping drugmakers in the development of adjuvant therapies for early stage cancer. LUNAR-2 could enable the detection of cancer at early stages. The potential U.S. market for LUNAR-1 is around $15 billion. LUNAR-2 has a much larger addressable market of more than $30 billion. 

If Guardant Health can capture a significant share of these markets, its long-term returns could make the 360% gain since its IPO look like chump change. I think that this stock has the kind of X factor that every investor should like.

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U.S. IPO Week Ahead: An Empty Calendar And A Quiet Week For The IPO Market – Seeking Alpha

There are no IPOs scheduled for the week ahead.

The most likely April IPOs

Despite the encouraging market rally this past week, the Renaissance IPO Volatility Index is still about double the five-year average and few companies have filed, indicating the IPO market’s slow April will continue.

April’s headline IPO could come from grocery giant Albertsons Companies (ACI), which is benefiting from a surge in demand and low interest rates. With successful public debuts from Keros Therapeutics (NASDAQ:KROS) and Zentalis Pharmaceuticals (NASDAQ:ZNTL), the most likely IPO launches include several biotechs, such as oncology-focused Ayala Pharmaceuticals (AYLA) and ORIC Pharmaceuticals (ORIC), ENT biotech Lyra Therapeutics (LYRA), and CNS drug developer NLS Pharmaceutics (NLSP). Massive capital raises by biotech VCs also indicate investor optimism in the space.

4 Recent Biotech Filers in the IPO Pipeline

Issuer
Business

Deal
Size

File Date

Lead
Underwriter

Ayala Pharmaceuticals

$50M

03/06/2020

Citi

Phase 2 biotech developing small molecule therapies for aggressive cancers.

Lyra Therapeutics

$58M

03/06/2020

BofA

Phase 2 biotech targeting ear, nose, and throat diseases.

NLS Pharmaceutics

$40M

02/28/2020

Maxim Group

Developing controlled-release formulations of approved drugs for ADHD and narcolepsy.

ORIC Pharmaceuticals

$86M

02/28/2020

Roth Cap.

Phase 1 biotech developing small molecule therapies for treatment-resistant cancers.

One lock-up period will be expiring in the week ahead. On Tuesday, 4/14: BellRing Brands (NYSE:BRBR).

IPO Market Snapshot

The Renaissance IPO Indices are market cap weighted baskets of newly public companies. As of 4/8/20, the Renaissance IPO Index was down 14.2% year-to-date, while the S&P 500 was down 14.9%. Renaissance Capital’s IPO ETF (NYSEARCA:IPO) tracks the index, and top ETF holdings include Uber (NYSE:UBER) and Spotify (NYSE:SPOT). The Renaissance International IPO Index was down 9.9% year-to-date, while the ACWX was down 21.7%. Renaissance Capital’s International IPO ETF (NYSEARCA:IPOS) tracks the index, and top ETF holdings include Meituan-Dianping and Adyen.

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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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US blacklist hurt China AI giant’s sales ahead of IPO attempt, Garage

[HONG KONG]  Megvii Technology’s revenue growth dissipated in the second half of 2019 after it joined Huawei Technologies on a US trade blacklist, underscoring the extent to which White House sanctions are hurting China’s technology leaders.
The company backed by Alibaba Group Holding grew revenue a mere 2.7 per cent in 2019’s …

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ANALYSIS: SPAC IPO Market Share Ascends to 30%, But Prices Dive – Bloomberg Law

The popularity of Special Purpose Acquisition Company (SPAC) initial public offerings (IPOs) continued their strong upward trajectory in the first quarter of 2020, with thirteen IPOs completed, according to data from Bloomberg Law.That represents nearly 30% of all IPOs—by a class of fundraising that once carried a strong stigma after …

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