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A call for better compliance to news media ethics: The case of the rumoured acquisition of Jumia by Zinox By Adeola Olanloko

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Last week, Nigeria’s business media was awash with the speculation that Leo-Stan Ekeh, the chairman of Zinox Technologies and owner of the Konga e-commerce platform is on his way to acquiring Jumia Technologies, Africa’s leading e-commerce platform. According to Nairametrics, an online business journal, Ekeh “has been scooping Jumia shares indirectly suggesting a possible acquisition could be in play if the opportunity arises.” In the same report, Nairametrics quoted the Head of Corporate Communications for Zinox Group, Gideon Ayogu, who refused to confirm or deny the takeover move, as saying that “nothing positive is impossible.”

In a statement signed by Jumia Nigeria, the company said that they do not comment on speculations, noting that such a bid must comply with the rules and conventions as stipulated by the New York Stock Exchange (NYSE) laws.

“As per US Securities Law, shareholders must disclose any shareholding above a 5% threshold and so far we are yet to see any such disclosure. We are focused on executing on our strategy to scale the business towards profitability. And as you can see from the Q1.22 results released on Tuesday, we made very good progress on this front. The fundamentals of the business are very strong, we posted the fastest GMV, Order and Revenue growth rates of the past 9 quarters,” the statement read.

How does one acquire a publicly listed company?

Who takes over companies on the pages of the newspaper? A look at how the stock market works shows that there are laid down procedures for the acquisition of a quoted company . A quoted company refers to any company whose shares are listed on a Stock Exchange – local or international. Jumia Technologies is listed on the New York Stock Exchange (NYSE)

One of the ways to achieve such a takeover/acquisition is by Management buyout. It is called a Management buyout in the instance that the Management owns a significant stake in the company such that acquiring the shares owned by Management takes the acquirer close to a controlling stake (50% plus one share of the company). Typically the acquiring company/individual enters into an agreement with the owners of the company to buy controlling shares of the company at a given price. The Board/Management of the company targeted for acquisition will facilitate the negotiations between the company’s shareholders and the proposed buyer. This process is what Standard Bank, owners of the Stanbic Bank brand, used to acquire  IBTC in September 2011 and is what is being played out between Elon Musk and Twitter. Jumia’s statement indicates no such discussions were held with Zinox.

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Another route is for an entity to scoop up shares from the floor of the exchange where the stocks are listed. These stocks are called over-the-counter (OTC) stocks because you can buy and sell them through most major online brokers. This was the route Heirs Holdings used to acquire a significant stake in Transcorp Plc in April 2011.

At Jumia’s current market capitalization, excluding any premium existing shareholders may demand, we estimate that to scoop up 51% of the company shares will require a minimum investment of over $350 million or N203 billion. Possibly the price will be higher if an average of the stock price in the past 12 months is used as a benchmark. If such an over the counter transaction in a single stock were to take place on the New York Stock Exchange, market watchers would have noticed the activity in the stock and would not rely on Nairametrics to bring it to their attention. Here the reporter overreached himself.

Typically before launching such an acquisition bid, the acquirer already owns significant shares in the company. Elon Musk for example owned 9.2% of Twitter stock before his acquisition bid and his aggregate stock holding was duly declared as required by the rules of the US Securities and Exchange Commission (SEC)

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The SEC law stipulates that anyone who hits an aggregate five percent shareholding threshold must declare it to the Exchange. It is what applies in most international Exchanges, including the Nigerian Stock Exchange. Failure to comply with this law is considered a violation of Securities law. Going by the statement from Jumia, there has been no such disclosure yet. We doubt that a very savvy investor like the Chairman of Zinox would have acquired shareholding in Jumia Technologies above this 5% threshold without disclosing it, given the implications of non-disclosure.

Is this a case of careless reporting and lack of due diligence?

Media analysts are thus suspecting that given Jumia and Zinox are well known brands in the Nigerian market, the  story may have been spun purely for its sensational value to drive clicks without thought on how it might affect stakeholders in the two companies, investing public and other critical stakeholders.

Jumia released its Quarter 2 financials on May 10th to Analysts and the Media. All listed companies are required to release their quarterly results to Analysts and the Media and Jumia publicly announced this date on its website in advance. The company reported posting the fastest GMV, order and revenue growth rates of the past nine quarters and this is possibly what drove the uptick in the stock price following its Earnings release not the rumour!

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Notwithstanding any future activity on Jumia Technologies stock, this particular story appears not to have been well researched and subjected to proper due diligence before it was published and this verges on carelessness and lack of respect for the reading public. Sensational titles always drive clicks for digital media but spending credibility just for a few more clicks is a bad trade and harms all digital newspapers. It is time for professional media practitioners to encourage compliance with ethics and tighten the rules either through private digital media group initiatives. Otherwise, we will give room to the government to intervene.

Adeola Olanloko, a business analyst writes from Lagos. 

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