Jumia Has Endured A Horror Week On The New York Stock Exchange Amid Fraud Claims

The Cinderella run on the New York Stock Exchange for the
largest e-commerce operator in Africa appears to be slowing, qz.com
reports.

After debuting its share at $14.50 for its historic initial
public offering (IPO) on Apr. 12, Jumia’s stock initially soared,
peaking at a closing price of $46.99 last week. It was one of the
10 best performing IPO stocks on the NYSE in 2019. But it’s gone
downhill since with the stock recording six straight days of
decline. The slide for Jumia is coming nearly a month after its IPO
first launched.

The slide could yet continue for Jumia as Citron Research, a
known stock short seller, has produced a report alleging the
company is fraudulent and claiming that its equity “is worthless.”
The main thrust of Citron’s report is centered on “material
discrepancies” in Jumia’s S1 filing with the United States
Securities and Exchange Commission (SEC) in March and a
confidential investor presentation Jumia allegedly made six months
earlier. As a short seller or advisory, Citron or Citron clients
would benefit if they have taken a short position on stock and the
stock price drops for any reason.

The Los Angeles-based Citron claims Jumia inflated its active
user and merchant pool and failed to disclose its rate of order
returns and cancellations in its S1 filing despite doing so in the
earlier investor presentation. Jumia has not responded to Quartz
Africa‘s email enquiries about the alleged discrepancies.

Citron also highlights Jumia’s continued losses since its
launch. It’s an ongoing theme for Jumia as it faces questions over
its path to profitability while navigating 14 different markets. So
far, it’s proved an expensive venture with losses estimated at
nearly $1 billion. While its IPO has been heralded as a success,
the company still faces lingering operational issues.

Since Citron’s report was published and tweeted on May 9,
Jumia’s stock has fallen further, seeing its steepest one day loss
after it had already endured five prior days of consecutive
losses.

But it’s not the first time Citron has made similar claims of
fraud against a publicly traded company however. Indeed, the
company has established a reputation for reports alleging fraud and
its founder, Andrew Left, has faced some repercussions. Left, who
describes himself as an activist short seller, was banned from
trading in Hong Kong for five years in 2016 by a markets misconduct
tribunal. It ruled Left made allegations that were “false and
misleading and likely to alarm ordinary investors” in a 2012 report
that Evergrande, the Chinese property developer, had presented
fraudulent information to investors.

There have also been calls, including a petition, for Citron to
be investigated by the SEC for “manipulation” and reports aimed “to
scare investors into overreacting.” A veteran US tech investor, who
asked not to be named, is familiar with Left and Citron’s work and
said Left had been known to flip flop on his own analysis,
suggesting shorting a stock then switching to going long at the
last minute. “I don’t think he’s breaking any SEC rules. Anyone can
say anything on social media long or short but I would never make
an investment decision based on what he says.”

In its report on Jumia, Citron repeatedly refers to Jumia as a
“Nigerian company” involved in fraud and notes “not even that
elusive Nigerian prince can cover this one up.” That reference is
significant given the infamy of online fraudsters claiming to be
fake Nigerian princes and the fraud red flags such emails are known
to signal.

Nigeria is Jumia’s biggest market but, as its S1 filing (which
Citron claims to have analyzed) pointedly shows, Jumia Group is not
a Nigerian company as it is led by French founders, incorporated in
Germany and headquartered in Dubai. And, as Quartz Africa has
previously reported, Jumia’s identity as an African company has
become a hot button topic since news of its planned IPO first
surfaced with notable insiders in African tech ecosystem keen to
brand the company as European rather than African.

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