There is a “rumour” that Jumia may spin off JumiaPay. Possibly, it can unlock more value by doing so. Of course, Jumia is a public company which makes spinoff really hard. Unless it can list JumiaPay on the exchange, the vehicles are limited. You do not break a NYSE traded company like akara and moi moi. Yet, let us do the academic analysis.
A LinkedIn user wrote thus:
I commented – and below, I am expanding that comment.
I am not sure Jumia has a lot of “trusts” in the financial “trustbank” to play that game. I do not believe that it was fraud that the management did not know. Nigeria is a very small economy for $18m to be under the table without top management knowledge. But if people do still believe Jumia, the spinoff will unlock more value for shareholders. JumiaPay with about 5 million “users” [the estimated Jumia users] will be one of the largest non-bank fintech players in Africa. Largely, JumiaPay can get at least $200m valuation there. Currently, the fintech unit is largely discounted by markets in the NYSE – few care about that JumiaPay component, mainly focusing on the ecommerce GMV, PL, etc.
So, spinning off JumiaPay will be a win for Jumia. It can help it get more value. Think of how PayPal ($125 billion market cap) has become bigger than eBay ($33 billion market cap). I can tell you that JumiaPay will be bigger than Jumia in Africa.
Marginal cost will continue to affect Jumia (i.e. the ecommerce business) ability to become profitable. JumiaPay will not have that problem. Of course JumiaPay will have to compete in the world of Paystack, Flutterwave, etc. If Jumia spins off JumiaPay, on day 1, JumiaPay will have a really great client in Jumia and will be making money. That is why it will be a great business – makes money and becomes profitable fast.
Click to join Tekedia Capital and build Next Africa with min of $10,000 co-investment in startups.