One potential way to gain
access to the still private but up and coming future
stars in emerging markets is by simply buying the current public
companies. Many of the largest emerging market companies have over
time become prolific venture investors as experience and knowledge in
their respective segments have allowed for companies to amass significant
private equity positions both in local markets and abroad.
these same larger companies have separate business units which operate within
the larger corporation that can be spun out to current shareholders. Such
is the case with two recently announced IPOs: African ecommerce company
Jumia, in which Germany’s Rocket Internet (RCKZF) has an interest and Naspers’
(NPSNY) $134 billion stake in Chinese internet giant Tencent Holdings (TCEHY).
to the Wall Street Journal, Jumia filed paperwork with the Securities and Exchange
Commission (SEC) for an initial public offering (IPO) on the New York Stock
Exchange (NYSE) .
Jumia, according to the Wall
Street Journal, is the largest ecommerce platform in Africa and would be the
first technology company to launch on the NYSE. The company declined to
give details on the expected size or timing of the IPO.
Jumia has grown rapidly,
with operations in 14 African countries since it was launched in 2012 and has
81,000 active merchants, according to the article. The company, out of
necessity, has built most of its own infrastructure including JumiaPay, which
accounted for more than half of its transactions in Nigeria and Egypt in 2018,
according to the article. The company plans to use the proceeds from its
offering to further expand its business.
Germany’s Rocket Internet
holds a 28% stake in Jumia, according to the Wall Street Journal.
Naspers' Spin-Off of its Internet Assets
According to the Wall Street
Journal, Naspers plans to create a European-traded technology company that will
hold its $134 billion stake in China’s Tencent Holdings.
The new company will consist of all of Naspers internet interests outside of
its home South Africa. Also included is Russian social-media operator
Mail.ru Group (MLRYY). Naspers will hold 75% of the company after the
According to the Wall Street
Journal, the listing is intended to unlock value for Naspers shareholders and
allow investors to directly access its portfolio of international internet
assets. The article went on to note that Naspers current market value of
$100 billion is less than the value of its Tencent stake.
98.5% of the value of the
new company would be made up of minority interests in other listed companies,
according to the Wall Street Journal. These include German food-delivery
service Delivery Hero (DLVHF) and India-based travel business MakeMyTrip
History of Unlocking Value
These two transactions join
a list of several others in recent years. Tencent spun-out China
Literature (CHLLF) in 9/17 and its Tencent Music (TME) unit in 12/18.
Baidu spun-out iQiyi (IQ) in 3/18. YY Inc. (YY) spun-out its Huya Broadcasting
(HUYA) unit in 5/18.
Many of the largest emerging
markets ecommerce companies have interests in companies producing the next
generation of technology products. Additionally, many have operating
units that can be spun-out to create potential value for current
shareholders. Jumia’s IPO and Naspers’ spin-off of its non-South Africa
internet interests are two recent examples of this.
Thus, gaining exposure to
the leading emerging market ecommerce companies may offer investors value
waiting to be unlocked.
Find out more about the Emerging Markets Internet & Ecommerce UCITS ETF (EMQQ).
Read our EMQQ Whitepaper "The Great Confluence" here.
Article Date: 15th May 2019.