South African used-car platform WeBuyCars sets sight on $420m valuation with JSE Listing

WeBuyCars will target a R7.8 billion (~$420 million) raise when its shares begin trading on the Johannesburg Stock Exchange (JSE) on Friday. The company has issued 417,181,120 shares at a consideration of R18.75 per share.

WeBuyCars allows customers to buy and sell used cars, acting as a middleman in the transactions. In 2023, the company sold a total of 142,337 vehicles and bought a total of 141,851. According to its parent company Transaction Capital, also JSE-listed, the unbundling and listing allows WeBuyCars shareholders to have direct access to a market-leading asset.

The listing of WeBuyCars presents a signal of the renaissance of South Africa’s IPO activity which saw only 13 listings in the last 3 years. When the JSE trade opening bell rings on Friday, whether the market will agree with or brush off WeBuyCars’ R18.75 per share ask remains to be seen.

Source: Transaction Capital

According to Jimmy Moyaha, founder of investment firm Lebowa Capital, WeBuyCars’ R18.75 per share price is reasonable considering the company’s strong business case. “R18,75 may be a little undervalued based on the book-build value they had identified. However, playing it safe only means more upside if you’ve got it right,” Moyaha told TechCabal.

Furthermore, Moyaha stated that the share price has the potential to reach highs of as much as R25 per share in the future. WeBuyCars, on the other hand, stated that it is investing in its proprietary AI, data, and analytics to boost its e-commerce sales. Currently, e-commerce sales represent 22% of total sales, down from the 27% recorded in 2022, showing that a lot of work is yet to be done to attract e-commerce customers to the platform.

However, other analysts are a bit sceptical about the company’s fortunes on the public markets, pointing to the company’s financial performance as a put-off factor. Transaction Capital’s latest financial results show that although the volume of cars bought and sold by WeBuyCars increased by 9% and 13% respectively, its earnings were down by as much as 14% from the previous year. The company’s cost-to-income ratio also increased from 57% in 2022 to 66% in 2023.