Jumia Agrees To USD 5 Mn Settlement To Make Class Action Lawsuits Go Away

In its just-released second quarter (Q2) 2020 results, Africa’s biggest e-tailer, Jumia, revealed it has reached an agreement that will put a stop to the litigation that became part of the company’s post-IPO woes.

Following allegations of impropriety in some of its reported numbers leading up to the celebrated NYSE listing, Jumia was targeted by several class action lawsuits filed against both the company and current and former members of its supervisory and management boards.

The lawsuits were filed in the U.S. District Court for the Southern District of New York and the New York County Supreme Court. The cases assert claims tied to securities fraud in connection with Jumia’s initial public offering.

But after seeing the cases drag on for over a year, Jumia revealed in its latest report that on August 11, it agreed to a settlement payment of USD 5 Mn, of which USD 1 Mn is in insurance. This settlement comes without any admission of impropriety.

“On August 11, 2020, we reached an agreement to fully resolve all of the actions, subject to standard conditions including court approval,” Jumia stated under a section titled “litigation update.”

“Under this agreement, in which the defendants do not admit any liability or wrongdoing, Jumia will make a settlement payment of USD 5 Mn, USD 1 Mn million of which will be funded by insurance coverage.”

In August 2019, Jumia confirmed it was facing several class action lawsuits while admitting that there had been some internal fraud stemming from improper order placements on the part of its JForce sales agent network in Nigeria.

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.

Jumia, however, maintained that the fraudulent orders did not impact its financial statements even though it acknowledged the reported GMV figure for Q2 2018 had been adjusted in light of the improper transactions.

But that did little to temper concerns and build confidence as Jumia continued to struggle with losses, such that it had to quit a number of underperforming markets, give up some of its business verticals and propel new ones and new methods as part of a “business mix rebalancing effort.”

Those rejigging efforts appear to be yielding fruit as they seem to have sparked a resurgence that has seen Jumia cut losses and make up ground on the path to profitability. Jumia shares have also picked up recently after collapsing for much of last year and this year.

The numbers in Jumia’s latest results would suggest the e-commerce player is on track.

As seen in the report for the quarter ended June 30, 2020, Jumia’s operating loss decreased by 44 percent year-over-year to EUR 37.6 Mn (USD 44.3 Mn). Gross profit after fulfillment expense reached a record EUR 6 Mn (USD 7.07 Mn), compared to a loss of USD 825.6 K in the second quarter of 2019.

Additionally, Jumia’s annual active consumers reached 6.8 million, a year-over-year increase of 40 percent. Orders reached 6.8 million, registering a y-o-y growth of 8 percent.

However, gross merchandise value (GMV) dropped 13 percent compared to Q2 2019 to EUR 228 Mn (USD 268.8 Mn). Jumia measures GMV as the “total value of orders for products and services, including shipping fees, value-added tax, and before deductions of any discounts or vouchers, irrespective of cancellations or returns for the relevant period.”

JumiaPay also continued its impressive run, hitting an all-time high TPV of EUR 53.6 Mn (USD 63.2 Mn).

Featured Image Courtesy: Bloomberg