We Didn’t Falsify Our Figures, Africa Lacks The Calibre Of Investors We Need – Jumia CEO On Fraud Claims

In response to rife allegations of securities fraud, Jumia Nigeria CEO, Juliet Anammah, addressed claims that the company falsified figures ahead of its NYSE IPO by rebuffing those claims as false while saying Africa lacks the calibre of investors the company needs at this point.

The past week has been particularly rocky for Jumia; the largest Africa-focused e-commerce platform, whose honeymoon period since listing on the New York Stock Exchange was interrupted in the worst possible way by a damning tell-all which basically called the company a fraud.

That Citron report was made public last week and it has sort of gone viral. Ever since, Jumia, whose stocks had been flying high since supposedly making history by becoming the “first African tech company to list on the NYSE,” has seen its share price plunge downhill by as much as 50 percent. On May 9, the company also lost 18 percent of its share value.

According to the allegations, before coming to the U.S. markets, Jumia made one last effort to raise money in 2018 and in line with standard practice, the company submitted a Confidential Investor Presentation (CIP).

Citron Research had obtained a copy of this document and identified many material discrepancies in reported key financials. Jumia is accused of marketing the numbers in the CIP to investors ahead of its IPO, and then, later omitting material facts and making material changes to its key financial metrics to make the business seem more viable than it actually is.

In plain language, the report claims that Jumia committed a securities fraud by ‘fudging’ the numbers and attempting to dump the stocks on unsuspecting investors; a crime big enough to attract steep fines and maybe some jail terms too.

Although these are still claims and nothing has been proven yet, this information has undoubtedly done enough to smear the company’s reputation and spook investors, with the company’s stocks plummeting ever since the word got out.

And it appears there’s enough dirt on the company to even take the matter to the courts. Just a few days back, Kaskela Law LLC announced a class action lawsuit against Africa’s self-acclaimed first tech unicorn on the grounds of violation of laws governing securities exchange.

The Pennsylvania-based law firm filed a lawsuit against Jumia Technologies in the interest of the investors who purchased the e-tailer’s American Depositary Shares (ADS) between April 12 and May 9, 2019. Kaskela also requested that stock buyers who fall under this category and those with losses in excess of USD 100 K join the case as lead plaintiffs. Phew! What a week it’s been for the e-commerce giant.

Jumia executives have been tight-lipped since the scathing attack on its business but it appears someone is finally speaking up. In trying to address the recent controversy, Juliet Anammah, CEO of Jumia Nigeria, described claims that the company falsified its figures as false.

In her rebuttal, she claimed that contrary to the report that the company reported a rise in active consumer numbers from 2.1 million in October last year to 2.7 million by April, Jumia’s quarterly report stated only 1.3 million active consumers in the last one year.

As she said; “It is stated in our prospectus to our investors that our active consumers are those who made orders on our website within one particular year.”

She emphasized that though the company recorded a lot of canceled orders, failed or returned deliveries because most customers prefer payment on delivery, there was a 58 percent increase in Gross Merchandise Value year on year between Q1 2018 and Q1 2019.

The Jumia Executive also offered some clarification as to why the company chose to list on the New York Stock Exchange over any of the stock markets in the 14 African countries where it has a presence. According to her, it was because Jumia is in need of “long-term investors” and such investors are not present in Africa currently.

“When you list, especially when you are growing at a stage where we are, of course, you want the money to grow but you also want people that will invest for a long time,” Ms. Anammah reiterated while addressing journalists in Lagos yesterday during the presentation of the company’s report for Q1 2019.

“Not just take fund and buy their shares and invest for x months and sell their shares when something else attracts them. Another person comes and does the same. It increases volatility in price and as much as possible we try to avoid that.”

Ms. Anammah said the calibre of financial investors needed by the company is, at the present, not in Africa.

“To find those people, you need people who are well experienced in your field, your industry, at this point in time we don’t have them in Africa,” she said.

“The industry is just seven years old, so you are likely to get financial investors that will come in and out and that can be very destructive.”

There’s yet to be any comment from Sacha Poignonnec and Jeremy Hodara, the co-founders and co-CEOs of the Rocket Internet-backed company, as it looks like a coy stance has been taken by the major executives with regards to the matter. But that could change in the coming weeks if the case being built against Jumia proceeds to trial. And it would be interesting to see how that plays out.

Featured Image Courtesy: guardian.ng