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Recently, Jumia, the popular e-commerce site, was listed at the greatest stock exchange, the New York Stock Exchange (NYSE). The stock did very fine at the beginning where it advanced up by 75% on the first day but then fell because of a release made by Citron Research which accused them of fraud.
The company was established by two Frenchmen in Lagos in 2012, and Nigeria is its biggest market. Jumia operates online marketplaces in 14 countries including Kenya, Morocco, and Egypt. The biggest owner is South Africa’s MTN, with other pre-IPO investors including AXA, Rocket Internet, Millicom, Pernod Ricard, and MasterCard.

The company now has numerous difficulties as a class action lawsuit has been filed against them on behalf of purchasers of Jumia shares. The purchasers of Jumia Technologies AG shares (listed under NYSE: JMIA) via their attorneys, Robbins Geller Rudman & Dowd LLP filed the lawsuit on 14th May 2019 in the court of the Southern District of New York.

The lawsuit twirls about the incriminating Citron Research report where it claimed that Jumia had declined to state in their F-1 filing that 41% of purchases were returned, not delivered or canceled.

“In 18 years of publishing, Citron has never seen such an obvious fraud as Jumia. As the media in the US is naively anointing Jumia as the ‘Amazon of Africa’, the media in its home country of Nigeria has a plethora of articles discussing the extensive fraud in this Nigerian company. Not also that difficult Nigerian prince can coat this one up,”


The lawsuit states that the allegation made by the company were ‘substantially false and misleading’ when they were made because they ‘failed to reveal the following antagonistic facts:

  1. Jumia had materially exaggerated its current customers and active merchants;
  2. That Jumia descriptions about its orders, order cancellations, undelivered orders, and returned orders lacked a satisfactory factual basis and materially overstated the Company’s sales;
  3. That Jumia failed to sufficiently reveal associated party transactions; and
  4. That Jumia’s financial statements were presented in violation of applicable accounting measures.
    This is not going well for Jumia and we will have to wait and see how this lawsuit will turn out in court and the impact it will have on Jumia’s shares.
    Mixed reactions
    A sense of elation was clear as the stock soared in New York. Steven Grin, managing partner of Lateral Capital in New York, a Jumia shareholder, called the listing “a watershed moment” for entrepreneurship in Africa. Jumia, he argues, stands comparison with Alibaba in 2005 when Yahoo! bought a 40% stake.
    Other investors, nonetheless, were more cautious. “We have seen MTN being burnt over and over again in Nigeria”, said Byron Lotter, portfolio manager at Vestact Asset Management in Johannesburg. Investing in Jumia “does arise with difficult political jeopardies”. MTN has said that a planned IPO of its Nigerian section is on hold until a $2bn tax row with the Nigerian authorities is resolved.



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