Nipate
Forum => Kenya Discussion => Topic started by: Nefertiti on May 10, 2019, 10:20:54 AM
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Jumia shares sink after Citron calls the African e-commerce company a 'fraud'
Published: May 9, 2019 1:58 p.m. ET
Jumia Technologies AG JMIA, -18.79% shares sank 14.6% in Thursday trading after Citron Research's Andrew Left, a noted short seller, announced in a report that they have the "smoking gun" that shows why Jumia equity is "worthless." "In 18 years of publishing, Citron has never seen such an obvious fraud as Jumia," the report said. Citron goes on to highlight what it calls "material discrepancies" between the confidential investor presentation from October 2018 and what the company told the Securities Exchange Commission, including: inflating active customer and active merchant numbers by 20% to 30%; and that 41% of orders were returned, not delivered or canceled. "When a company markets to investors ahead of its IPO and then a few months later omits material facts and makes material changes to its key financial metrics to make the business seem viable, this is securities fraud," the report says. Citron also references media from Nigeria, Jumia's biggest market, accusing Jumia of fraudulent activity. Jumia shares began trading on April 12, and soared 160% as of early this week. Shares were priced at $14.50.
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Returns and cancellation is a major problem. I am vendor on the platform and sometimes we have make sure Jumia calls the customer to confirm orders. Also Jumia needs to scrub sellers list, there are many duplicate accounts.
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Jumia faces class action for unspecified amounts in damages - see attachment
According to the Citron Report, while media in the U.S. naively anointed Jumia the “Amazon of Africa,” numerous articles have been issued in its home country of Nigeria claiming widespread fraud at the Company. For example, the Citron Report states, in pertinent part:
The systemic fraud at Jumia had not been overlooked by local Nigerian newspapers as they articulate the issue clearer than Citron can. An investigation by Nigerian news reporters described Jumia as follows:
• “Cuts a picture of a fast-growing e-commerce company” but “beneath what is painted is a company struggling to survive over internal fraudulent activities.”
• Jumia is “sitting on gun powder which might explode any moment as the retail # (outfit is filled with many shady deals.”
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Local media commented that their investigation revealed that many top directors of Jumia were engaging in serious acts of fraud including diverting money that was supposed to be used for projects into their own bank accounts and using director owned private companies to accept Jumia orders while receiving advance payments but never fulfilling the orders. In some cases, these fraudsters were relatives of senior management and “the directors would sweep the case under the carpet in order to avoid public scrutiny”.