Report from a Research Company’s Sees Jumiaâ€™s Stock Plummet
A couple of weeks ago, eCommerce giant made headlines by listing in the New York Stock Exchange. It was a big deal because the company sold the development as â€˜Africaâ€™s first unicornâ€™ to trade in the prestigious NYSE. Of course, the phrase â€˜African companyâ€™ was disputed widely, as the records the firm submitted to NYSE indicated clearly it is a German company, with its corporate structure spread across different cities in Europe.
After riding on the controversy of its IPO for some time, the value of its shares rose, but only for a short time. It has since been reported that its shares were falling suddenly after a research firm and short-seller called Citron examined its books. Citron has already published a report of its findings, which calls Jumia an â€˜obvious fraudâ€™, and that the company pulled the worst scam in Citronâ€™s 18 years of operations.
â€œIn 18 years of publishing, Citron has never seen such an obvious fraud as Jumia.Â As the media in the US is naively anointing Jumia the â€œAmazon of Africaâ€, the media in its home country of Nigeria has a plethora of articles discussing the widespread fraud in this Nigerian company.Â Not even that elusive Nigerian prince can cover this one up,â€ reads part of the report.
The report further explains its analysis based on several metrics such as security fraud marked by cooked financial books and so much more.
â€œAt the end of 2018, Jumia had a yearâ€™s worth of cash left and its two largest shareholders, MTN and Rocket Internet, wanted an exit.Â Therefore, Jumia filed for an IPO in March 2019, fudged its numbers, and began trading last month,â€ highlights the report.
Citron obtained Jumiaâ€™s confidential investor report from 2018 that isÂ said to feature vast material discrepancies. For instance, Jumia reportedly inflated its active customer and active merchant figures by up to 30 percent. It also did not report the correct figures of operations such as orders that were returned or canceled.
â€œInstead, Jumia disclosed that â€œorders accounting for 14.4% of our GMV were either failed deliveries or returned by our consumersâ€ in 2018.Â Assuming 41% of orders were returned, not delivered, or canceled in 2018, this implies that almost 30% of orders were canceled in 2018.Â Since Jumia primarily sells consumer electronics, which should not have this high of a cancellation rate, it wreaks of fraud,â€ reports Citron.
Other issues include cases of previous fraudulent activities that paint Jumia a fast-growing eCommerce site, yet it is struggling to survive.
Citron recommends further investigation by U.S.â€™s SEC to weed out fraud should any of the allegations be substantiated. However, it is worth noting that Citron has peddled similar allegations to e-commerce firm Shopify that ended up being false.
Jumia is yet to respond to the matter as of this writing.