Investors in Jumia reevaluate their holdings, for better and worse

According to the most recent 13G/A filing made public by the asset manager, Baillie Gifford, the Edinburgh-based asset management company long known for its affinity for pre-IPO tech companies, has reduced its holdings in African e-commerce giant Jumia.

Baillie Gifford disclosed ownership of 18.75 million Jumia shares, or 13.69% of the company, in the filing. The asset management company reported 19.85 million shares in Jumia’s prior filing from a year prior, representing 10.06% of the company at that time. That represents a 5.50% drop in shares and a 0.67% decline in ownership.

The Scotland-based asset management company, which is well into its century, has backed reputable private and public tech firms like Amazon, Google, Salesforce, Tesla, Airbnb, Spotify, Lyft, Palantir, and SpaceX since the beginning. Additionally, it has made investments in business ventures in other regions, such as China’s NIO and Alibaba, as well as African internet companies Naspers and Jumia.

Three years after the e-commerce behemoth went public, Baillie Gifford purchased Jumia shares in 2019. Since then, the Scottish mortgage trust company, which is Jumia’s largest institutional investor, has sold and bought back a portion of its shares, with this most recent transaction representing its largest share decline to date. The biggest shareholder in the e-commerce platform is still Baillie Gifford.

Jumia made management changes in November of last year as a result of several years of reporting losses. Francis Dufay was appointed as acting CEO in place of co-founders Sacha Poignonnec and Jeremy Hodara, who had resigned from their co-CEO positions. The change was accompanied by immediate cuts to many product lines and layoffs, including the termination of a few executives from the company’s Dubai office. All of this is being done to try and capture profits that the business has been unable to capture.

The African e-tailer made significant strides in Q3 2022 to reduce losses by 13% from $52.5 million to $45.5 million, which was the lowest level in six quarters. Despite this development, public trust in the online retailer appears to be declining. Jumia’s stock fell to $3.88 per share after the news on Wednesday, and its share price has dropped by 51% over the past year. It currently trades just above $4, with a market cap 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.

The performance of Jumia on the stock market may have influenced Baillie Gifford’s decision to sell some of its shares. The investment group admitted last week that 2022 was a “humbling year” after losing more than $14 billion on stakes in Tesla and Shopify, according to the Financial Times. On the other hand, it could be the investment group’s strategy for reducing the mounting losses it started to incur last year, particularly around growth stocks, which have taken significant hits in the face of rising interest rates and recession fears. That still doesn’t explain why the fund group, which has over $230 billion in AUM, increased 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 more details.

It’s not all bad news for Jumia, though, as other significant shareholders, such as D. E. Shaw, Goldman Sachs, and Bank of America, took a different approach and increased their shares in the company; as of the most recent Nasdaq report, they now own 2.21%, 1.27%, and 1.40%, respectively.