Jumia’s Share Price At The New York Bourse Slumps Over ‘Fraud’ Report

Jumia’s shares price in the New York Stock Exchange has sank by more than 20 percent, following a report by American  stock commentary website that it engaged in massive fraud before listing at the Bourse.

In its report, Citron says that Jumia exaggerated its numbers after realising that key investors were set to leave.

The report which indicates that Jumia’s Confidential Presentation of October 2018 indicated that it had 2.1 active customers online, but inflated the numbers to 2.7 million in public reports.

Also, the company indicated that it had 43,000 merchants in the confidential report but in public it increased the numbers to 53,000.

“At the end of 2018, Jumia had a year’s worth of cash left and its two largest shareholders, MTN and Rocket Internet, wanted an exit. Therefore, Jumia filed for an IPO in March 2019, fudged its numbers, and began trading last month,” states the report in part.

“Jumia learned the hard way that Nigeria, Jumia’s largest and most important market, is not an easy place to do ecommerce for plenty of reasons including logistics, poverty, and a culture of corruption,” adds the report.

Citron reveals that business was so bad for Jumia that 41 percent of orders were returned, not delivered, or cancelled. This was previously disclosed in the Company’s October 2018 confidential investor presentation.

However, in public, Jumia announced that “orders accounting for 14.4 percent of our gross merchandise volume were either failed deliveries or returned by our consumers” in 2018.

“Since Jumia primarily sells consumer electronics, which should not have this high of a cancellation rate, it wreaks of fraud,” adds the report.

In Nigeria, agents who normally place orders for clients were found to be involved in fraud.

The report further reveals that in February 2016, Jumia sold four of its subsidiaries to Jumia Co-CEO, Jeremy Hodara, for one euro (Ksh113) each. Jumia claims that  he “transaction was motivated by [Jumia’s] intention to cease operations in Tanzania, and Jeremy Hodara’s intention to run operations in Tanzania under his sole ownership but to continue operating the Tanzanian Entities under the Jumia brand.”

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Despite only generating revenue of 238,000 Euros (Ksh27 million) and net losses of over 3 million euro (Ksh341 million) in 2017, Jumia reacquired these businesses in 2018 from Hodara for an undisclosed price.

During the same year, Jumia acquired Jumia Facilities, a payroll and support services operation based in Dubai, from Hodara for an undisclosed price.

Just before IPO, a Jumia MD was questioned by Nigerian police over allegations of fraudulent diversion of funds.

Jumia shares began trading on April 12, and soared 160 percent as of early this week. Shares were priced at $14.50 (Ksh1450).