It’s been a particularly tough year for the Africa-based e-commerce company, Jumia. The company was left reeling after its stocks plummeted due to some concerning revelations which came to light shortly after its much-anticipated IPO on the New York Stock Exchange (NYSE).
Since then, things have never quite been the same for Jumia and the company (which is yet to turn in a profit and has accumulated over USD 1 Bn in losses since launching in 2012) has revealed yet more losses in its just-released financial statement for the second quarter of 2019, though the picture is not entirely ugly.
According to the financial report, Jumia’s operating loss increased from USD 46.5 Mn a year ago to USD 74.02 Mn in the second quarter of 2019, mainly due to an increase in share-based compensation expense. However, adjusted EBITDA loss, as a percentage of GMV narrowed from -21.4 percent to -15.8 percent on better margins.
The e-commerce platform that operates primarily in Africa also revealed on Wednesday that its second-quarter revenues improved 58.3 percent to USD 43.5 Mn, as marketplace revenues almost doubled year-over-year. The top-line was slightly short of the street projection of USD 45.88 Mn.
Also, the company revealed that its gross merchandise volume grew 68.9 percent to USD 311.8 Mn in Q2, on the back of the growth of “active consumers and spend per active consumer.” It said that the number of active customers at the end of the quarter was 4.8 million, up from 3.2 million a year ago.
On a worrying note, Jumia also identified graft in its Nigerian salesforce; by and large, its biggest market. The Africa-focused online retailer cited cases of improper transactions in its Nigeria business that amounted to as much as 4 percent of first-quarter sales.
The company revealed it had recently uncovered instances of improper orders placed and subsequently canceled on its marketplace platform, wrongly inflating its order volume. Jumia is also convinced that some of the improper sales practices were carried out by its network of commissioned agents, better known as “Jumia Force.”
Jumia’s latest financial report shows that, collectively, the improper orders generated around USD 17.5 Mn in gross merchandise volume (GMV) value between the last quarter of 2018 and the first two quarters of 2019. However, the company maintains that the fraudulent orders did not affect its financial statements even though it made it clear that the improper transactions did trigger adjustments in its reported GMV figure for Q2 2018.
While the company says it is adopting measures to eliminate cases of corruption (Jumia says it has suspended culpable employees), the findings could be thought to support claims of malpractice made by short-sellers, Citron, in a report three months ago, which brought an abrupt end to a share-price rally following Jumia’s IPO which had happened barely a month earlier.
Jumia debuted on the New York Stock Exchange as JMIA in April this year, listing 13.5 million shares for USD 14.50 apiece. The stock shot up 76 percent on the first day of trading, but much of the early enthusiasm dissipated after Citron labeled the company “a fraud and called its stock trash.” JMIA shares fell 12 percent soon after the damning document got out. Till date, the stock is up only 1.7 percent from its offer price.
The fallout from the situation also triggered several lawsuits against Jumia and the company has now confirmed that it is facing “several class-action lawsuits over alleged misstatements and omissions” in its IPO prospectus, though it adds that those lawsuits are still in their early stages.
This post has been updated with some new information.
Featured Image Courtesy: George Osodi/Bloomberg