Baillie Gifford, an asset management company based in Edinburgh known for its propensity for pre-IPO digital businesses, has cut its shares in African e-commerce giant Jumia.
Approximately 9.39% of Jumia is owned by Baillie Gifford, which holds 18.75 million shares. The asset management company owned 10.06% of the company at the time of the most recent filing that Jumia made, which was done a year ago. They reported having 19.85 million shares. That equates to a fall in shares of 5.50% and a decrease in ownership of 0.67%.
The Scotland-based asset management company, which is well into its second century of operation, has been an early investor of notable private and public technology businesses such as Amazon, Google, Salesforce, Tesla, Airbnb, Spotify, Lyft, Palantir, and SpaceX. It has also participated in business transactions in other regions, such as China’s Alibaba and NIO, as well as those involving the online companies Naspers and Jumia, which are situated in Africa.
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Baillie Gifford’s investment in Jumia
In 2019, Baillie Gifford made a purchase of Jumia shares, which was three years after the e-commerce behemoth had gone public. Since that time, the Scottish mortgage trust company, which is Jumia’s largest institutional investor, has sold and repurchased a portion of its shares every January. The most recent transaction, which occurred just recently, resulted in the most significant drop in share price that the company has ever experienced. The investment firm Baillie Gifford is still the company with the most shares in the e-commerce platform.
Losses in Jumia
After several years of reporting losses, in November of 2022, Jumia made changes to its management. Francis Dufay was installed as acting CEO to replace co-founders Sacha Poignonnec and Jeremy Hodara, who resigned from their roles as co-CEOs. This followed several years of Jumia reporting losses. This decision resulted in immediate cuts across a variety of product lines as well as redundancies, including the termination of a few executives based at the company’s Dubai office. All of this is being done in an effort to track down the profits that have eluded the corporation.
The African e-tailer made significant headway in cutting its losses during the third quarter of 2022, bringing them down by 13% from $52.5 million to $45.5 million, which was the lowest amount in the past six quarters. In spite of these advancements, there is a general perception that public confidence in the e-commerce company has decreased. Following the announcements made on Wednesday, the price of Jumia’s stock dropped to $3.88 per share; the company currently trades for slightly above $4 and has a market valuation of $404 million. In the previous year, the share price of Jumia fell by 51%. The online retailer finished the third quarter with a total liquidity position of $284.7 million, of which there was a total of $104.3 million in cash and cash equivalents on hand.
It is possible that the success that Jumia has had on the exchange played a role in Baillie Gifford’s decision to sell some of its shares. On the other hand, it could be the investment firm’s way of cutting back on the escalating losses it began to incur last year, notably around growth stocks, which have taken huge hits in the face of increasing interest rates and recession fears, the investment group admitted 2022 was a “humbling year” after it lost with over $14 billion on stakes in Tesla and Shopify, according to Financial Times. In any case, it could be the investment firm’s way of cutting back on the mounting losses it began to incur last year. However, this does not explain why the fund firm, which manages over 230 billion dollars in assets under management (AUM), raised its position in other companies that are losing money this past week, such as the Chinese electric vehicle manufacturer NIO and Wix.com. The following month’s scheduled earnings conference for Jumia should provide additional insight into the problem.
However, it is not all doom and gloom for Jumia as other large shareholders, such as D. E. Shaw, Goldman Sachs, and Bank of America, chose a new path and enhanced their shares in the company, owning 2.21%, 1.27%, and 1.40%, respectively, according to Nasdaq. Other large shareholders increased their holdings in the company.