Jumia’s Share Price Nosedives by Over 50 Pc After Fraud Allegations

Jumia is reported to be struggling to dismiss allegations made against it claiming that it had forged numbers in an attempt to paint a picture of a stable business prior to listing on the New York Stock Exchange (NYSE).

The Africa-focused e-commerce firm which has operations in East Africa has been accused of fraud in a new report, only a month after it listed on the NYSE.

The report by Citron Research made allegations against the firm, a development that has resulted in its share price nosediving by over 50 percent.

The allegations come at a time when questions linger on whether the company can be considered a truly African entity not only because of opting to list on the NYSE but also due to its ownership structure that includes incorporation in Germany, headquarters in Dubai and a central tech team based in Portugal.

Riding on a tagline of “100 percent African” and often seen as the “Amazon of Africa,” Jumia has operations in 14 countries with its biggest markets being Nigeria, Kenya, Morocco, and Egypt.

The Allegations

In the report, Citron claims that in order to raise money from investors, Jumia inflated its active consumers and active merchants’ figures by 20 to 30 percent and failed to make disclosures that 41 percent of orders were returned, not delivered, or canceled.

“Assuming 41 percent of orders were returned, not delivered, or canceled in 2018, this implies that almost 30 percent of orders were canceled in 2018. Since Jumia primarily sells consumer electronics, which should not have this high a cancellation rate, it reeks of fraud,” says the report.

The report adds that between 2015 and 2018, Jumia made little progress in its core business with revenues declining from 145 million USD to 131 million USD while adjusted earnings before interest, tax, depreciation, and amortization (Ebitda) went from 161 million USD to 150 million USD.

The Consequences

Following the release of the report, effects on the firm’s share price which debuted at 14.50 dollars on the NYSE after it listed through an initial public offering have been adverse.

While the stock peaked by over 70 percent to hit 46.99 dollars, it has since come crumbling down, trading at 25 dollars by close of trading last week.

The allegations by Citron have prompted US investments fraud investigators Holzer & Holzer to launch a probe of the firm.

Jumia’s Financials

According to the company’s Q1 financial results released this week, its gross merchandise value (GMV), the total amount of goods sold over the period, posted a 58 percent increase to 269.3 million USD from 170.5 million USD over the same period last year.

Despite an increase in sales, operating losses widened to 50.9 million USD from 38.4 million USD with negative Ebitda increasing to 44.3 million USD from 33.8 million USD.

Since inception in 2012, the company has now accumulated over 1 billion USD in losses.

Source: The East African