Baillie Gifford, an Edinburgh-based wealth management company long known for its affinity for pre-IPO internet businesses, has decreased its stake in Jumia, the largest e-commerce company in Africa.
According to the wealth manager’s most recent 13G/A filing, Baillie Gifford disclosed ownership of 18.75 million shares in Jumia, representing 13.69% of the company. However, the asset management company reported 19.85 million shares in Jumia’s prior filing from a year ago, which represented 10.06% of the company at that time. That represents a 5.50% drop in shares and a 0.67% decline in ownership.
Although it is unclear what might be the reason for the reported drop in the stake, the decision to sell some of its shares may also have to do with Jumia’s performance in the stock market.
We know that the company made several changes to its management team after reporting several years of losses to its operations and revenue. The company installed Francis Dufay as acting CEO to replace co-founders Sacha Poignonnec and Jeremy Hodara, who resigned from their co-CEO roles.
The move was followed by instant cuts across various product lines and redundancies, including letting go of a few executives from its Dubai office, a strategy implored to make the company profitable.
On the other hand, it could be the investment firm’s way of cutting back on the mounting losses it began to incur last year, particularly around growth stocks, which have taken massive hits in the face of rising interest rates and recession fears (last week, the investment group admitted 2022 was a “humbling year” after it lost more than $14 billion on stakes in Tesla and Shopify, according to Financial Times).
The Scotland-based asset management company, which is well into its decade, has backed prominent private and public tech firms like Amazon, Google, Salesforce, Tesla, Airbnb, Spotify, Lyft, Palantir, and SpaceX since its inception.
Additionally, it has invested in commercial ventures in various regions, such as China’s NIO and Alibaba, and African internet companies Naspers and Jumia.
More on Gifford’s stake in Jumia
Baillie Gifford bought Jumia shares in 2019, three years after the e-commerce giant went public. Since then, the Scottish mortgage trust company, Jumia’s largest institutional investor, has sold and purchased back a portion of its shares, with this most recent transaction being its biggest share decline.
In Q3 2022, the African e-tailer made considerable progress in trimming its losses by 13% from $52.5 million to $45.5 million, its lowest in six quarters. Despite this progress, public confidence in the company seems to have waned.
Jumia’s shares fell to $3.88 per share after the news on Wednesday, and its share price has dropped by 51% over the previous year. It currently trades just above $4, with a market valuation of $404 million. The online retailer had $284.7 million in liquid assets at the end of the third quarter, of which $104.3 million was in cash and cash equivalents.
That still doesn’t explain why the fund firm, which has over $230 billion in AUM, boosted its stake this past week in other loss-making businesses like Chinese EV manufacturer NIO and Wix.com. Next month’s earnings call from Jumia should provide further details.
It’s not all gloom for the company, though, as other large shareholders, including D. E. Shaw, Goldman Sachs, and Bank of America, took a different route and increased their shares in the company, owning 2.21%, 1.27% and 1.40%, respectively, per Nasdaq.
Jumia is one of the most backed African startups ever and has raised over $885 million over six fundraising rounds in the last seven years. Although it was established in Lagos in 2012, its wide geographic reach has allowed it to transcend its Nigerian origins and become a truly pan-African brand.
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