Sagarmatha applies for offshore listing

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CAPE TOWN – Sagarmatha Technologies, the multi-sided digital platform company in the Sekunjalo investment group, has applied to the South African Reserve Bank for an offshore listing, Sekunjalo chairperson Dr Iqbal Survé said yesterday.

He was interviewed following the massively successful listing in New York last week of Jumia, a West African unicorn, on Friday, which attracted investors on the US market specialising in backing e-commerce companies in emerging markets. The company has raised almost $200 million (R2.8bn) and its market cap rose to $4bn and its share price soared 75 percent on the first day of trading.

Jumia, 40 percent owned by MTN and still a loss-making company (about $200m in losses), delivers online services to about 4 million consumers in 14 African countries, including Ghana, Kenya, Ivory Coast, Morocco and Egypt, with more than 81 000 active sellers transacting online. The e-commerce platform, which has been growing for seven years, employs more than 5 000 people in Africa, a statement from the company said.

Sagarmatha unsuccessfully attempted to list on the Johannesburg Stock Exchange last year because of negative publicity it received (due in part to a “smear campaign” by a rival media group), due also to a technical financial reporting oversight and because investors did not appear to understand the model of listings of online digital platform groups, said Survé.

In the year to March 31, 2018, just prior to its proposed listing on the JSE, Sagarmatha reported a total comprehensive loss of R70m after the turnover of its e-commerce business had increased more than 90 percent over two years to R359.7m.

“At the time people were saying, how could you list a loss-making company on the JSE? They didn’t seem to understand that this is the model for listing multi-sided platform companies. This is the model followed by the listings of most high-performance technology stocks such as Facebook, Amazon, Netflix and Google,” said Survé.

Ride-hailing company Uber, which plans to list in New York soon and which some commentators say might be the biggest listing in US history with a possible valuation by the market of around $120bn, reported net income of R1bn last year due to the sale of operations in Asia and Russia, but it posted an operating loss of $3bn.

A capital raising through listing is essential to enable digital platforms to fund their rapid expansion potential, Survé said.

Currently, Sagarmatha’s growth was being managed because of the capital constraints of being privately owned, he said.

Survé said he was confident Sagarmatha would be positively received by investors. Unlike Jumia, which has one digital platform, Sagarmatha has eight interfacing platforms and it also boasted an all-African management, staff and systems development teams.

Survé did not disclose how much Sagarmatha hoped to raise through an offshore listing if it gets permission from the Reserve Bank to do so.

However, he said they had hoped to be the first African unicorn (a digital company valued at more than $1bn) and would possibly list up to 50 percent of Sagarmatha.

He said the well-known US-based valuations group Redwood Valuations Partners had valued its e-commerce business at $1.2bn and its other platforms at more than $2bn, giving a total valuation of more than $3.5bn, which is in line with Jumia.

Survé also expressed his disappointment that the JSE had to miss this opportunity.

This article first appeared on BUSINESS REPORT