Every once in a while, I like to take a closer look at a company’s ownership. It gives me a better feel for how insiders view a company’s future. In the case of Jumia Technologies (NYSE:JMIA), the changes happening in recent times suggests the future of JMIA stock is a good one.
According to Finviz.com, there are 22 consumer cyclical stocks (market capitalization of $2 billion or more) with year-to-date performance of 30% through Jan. 26.
Number one on the list is none other than GameStop (NYSE:GME), whose stock has caught the interest of the Reddit crowd, sending it 685% higher — as I write this, it’s up another 88% on the day — in just one month of trading. This, for a company that’s lost $270 million in the trailing 12 months on $5.2 billion in revenue.
For the rest of the 21 stocks living in the real world, Bed Bath & Beyond (NASDAQ:BBBY) has the second-best performance, up 107% YTD.
As for JMIA stock owners, you’ll have to settle for 14th best, up 43.5%. Of course, if you’ve owned for the past year, you’re up almost 600%.
That’s probably why Millicom International Cellular (NASDAQ:TIGO) sold all 9.64 million shares it held in Jumia in the fourth quarter of 2020.
A Closer Look at JMIA Stock
When Jumia went public in April 2019, selling 13.5 million American Depositary Shares (ADSs) at $14.50, Millicom owned virtually the same amount of shares. Due to the IPO, its ownership stake dropped 350 basis points from 9.6% to 6.1%.
According to Millicom’s 2019 annual report, it invested $32 million in Jumia. Jumia’s share price in the fourth quarter of 2020 had a high of $49 and a low of $7.65. Assuming Millicom sold at the midpoint of $28.33, it would have generated $273 million proceeds, a 753% return on investment over approximately 24 months.
I, too, would have considered selling a passive investment after this kind of return.
Who Else Bought In?
One of the other major investors in the Jumia IPO was Mastercard’s (NYSE:MA) European subsidiary. It acquired stock worth €50 million ($60.5 million) in a private placement concurrent to its IPO.
The investment was part of Mastercard’s partnership with Africa’s leading e-commerce platform. As part of the partnership, the two businesses were able to step up Jumia’s contactless payments in 2020. Anyone using a Mastercard to pay for items on Jumia’s platform received a 10% discount on their order.
“This incentive will help drive more consumers to adopt JumiaPay, the safe and digital payment method,” said Sami Louali, EVP Financial Services at Jumia, in May 2020.
Other big investors at the time of its 2019 IPO included South African telecom MTN Group. It owned 18.9% of Jumia’s shares post-IPO. In October 2020, MTN sold its entire stake for $142.3 million in net proceeds.
“We are proud to have been a partner in the evolution of one of Africa’s pioneering online marketplace businesses and will continue our relationship with Jumia through ongoing operational partnerships in some markets,” Reuters reported at the time.
Even the liquor giant, Pernod Ricard (OTCMKTS:PDRDY), owned 12.85 million shares or 8.2% of the company.
It turns out that Pernod Ricard invested in Jumia because it wanted to increase its online sales in Africa, a region it believes has tremendous potential.
“Our business relationship with Jumia traces back to 2016 with the successful launch of Jumia-Party, Jumia’s e-commerce platform based on the catching idea ‘We deliver. You Party,’ and centered on consumption moments,” said Paul-Robert Bouhier, president of Pernod Ricard Sub-Saharan Africa. He was speaking in 2018, but the gist hasn’t changed.
“This innovation has experienced solid growth in cities such as Lagos, Nairobi and Accra,” Bouhier added. “With this reinforced strategic partnership, Pernod Ricard will be able to offer its large portfolio of premium brands to a greater number of consumers in Africa.”
Makes sense.
Where’s JMIA Stock Going?
I’ve been a big fan of MercadoLibre (NASDAQ:MELI) since 2013. I liked that it was bringing South America into the 21st century from both an e-commerce and financial payments perspective.
More than seven years later, I’m still a big fan of MELI. If Jumia follows a similar path in Africa, I’m confident it will reward shareholders that are patient enough to let its story play out.
Recently, InvestorPlace’s Alex Sirois had excellent things to say about Jumia.
“Then there’s the problem of valuation. When you value it like Amazon, MercadoLibre (NASDAQ:MELI), or Alibaba, the current share price of over $40 makes it overvalued and subject to downward price pressure,” Sirois wrote.
“Avoid thinking too much about that because this company simply has a massive opportunity in front of it. Jumia has already scaled across the continent with essentially no competition, and it has carved out its path. It’s time for it to define African ecommerce.”
I couldn’t have said it better myself. He’s 100% on the money. My colleague isn’t the only one who feels this way.
On Jan. 7, Jumia filed a 13G with the Securities and Exchange Commission that confirmed investment manager Baillie Gifford owned 17.67 million shares (9.0 million ADS) of its stock at the end of 2020, good for a 10.1% stake in the company.
It’s owned those shares since shortly after the IPO. Baillie Gifford is known for taking bold tech bets. Jumia is just one of many.
The cast of characters Jumia’s attracted tells me there’s more money to be made on JMIA stock. Despite being in the red, I believe it’s a long-term buy.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
