Rocket Internet expects start-ups to break even soon

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German e-commerce investor Rocket Internet expects three of its top online start-ups to break even by the end of 2017 and pledged not to raise more capital or make big acquisitions for a few years.
Founded by brothers Oliver, Alexander and Marc Samwer in 2007, Rocket has set up dozens of e-commerce sites, aiming to replicate the success of Amazon and Alibaba in new markets in Africa, Latin America and Russia.
But Rocket Internet’s shares have slumped 49% this year after it appeared to shift focus by splashing out on online food takeaway businesses in developed markets, forcing it to seek more funds in February.
Chief executive Oliver Samwer sought to reassure investors on Wednesday, saying Rocket had 1.7 billion euros ($ 1.9 billion) in cash and no plans for dilutive capital raising in the next 36 months, nor for major acquisitions in the next 24 months.
“We are not an M&A company. We are not an investment company. We are building companies. You will see more great companies in the next 10 years,” he told a capital markets day webcast from London.
Samwer said three of the top 12 start-ups that Rocket calls its “proven winners” should break even by the end of 2017 and he expected to list at least one in the next 18 months.
The Berlin-based group, Europe’s largest Internet company, is viewed as a launch pad for stock market listings by online fashion to food delivery firms although volatile markets mean several mooted flotations have been put on ice.
Rocket Internet shares surged 18% to 28.60 euros, though the shares are still well below the 42.50 euro offer price in Rocket’s initial public offering (IPO) last October.
“It seems the market doubts Rocket’s ability to build profitable businesses. Yet Zalando suggests otherwise. The fact that it is profitable whereas Rocket companies are not is due to maturity,” said Berenberg analyst Sarah Simon.
Simon was referring to the now-profitable German online fashion firm that Rocket helped build. She said Rocket’s market capitalization did not factor in any value for its Global Fashion Group of five e-commerce sites, which could have sales in 2017 equal to those of Zalando in 2014.

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