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Sunday, May 12, 2019

Could 'Africa's Amazon', Jumia be just another Nigerian scam.

This is the news that shook the Nigerian ecommerce company's stocks on the New York Stock Exchange on Friday, 10th May 2019.

An American online investment newsletter company made this called Citron Research made this claim on Friday when they made a post calling Jumia 'an obvious scam' and the 'worst abuse of the IPO system.

The newsletter which also referred to the 'African Amazon's' company as 'worthless' made a 12 paged post and published it on Friday,

The newsletter stated some true and rather unsettling things about Jumia's operations.

It highlighted Jumia's $1 billion loss which was confirmed by several articles even written here in Nigeria.

 There's also the claim that the company forged some of the documents tendered before it's IPO to the Securities Exchange Commission.

This showed in the comparison between the documents Jumia tendered during an investment proposal meeting in October 2018 and the documents tendered in April 2019 just before the IPO.

There were differences like the claims that Jumia saw a rise in active customers from 2.1 million people in October, 2018 to 2.7 million people in April 2019.
Citron dismisses this claim and says it is a lie.

There was also the claim that the sellers on Jumia had increased from 43,000 to 53,000 during the same period, also marked untrue by Citron.

Another red flag Citron stated was that in their previous statement in October 2018, 41% of orders made were either cancelled, not delivered or returned but in the report this April Jumia stated that 14.4% of their orders were not delivered or returned which means they deliberately left out the 30% that was cancelled to save them from looking like a fraud [the percentage is too high].

All in all the bottom line is Jumia is not being straightforward with their investors and they're bearing the brunt as stock prices have reduced by 18% in just one day and despite Jumia's media team releasing statements debunking such news, the deed seems to have been done and there's no limit as to how much Jumia's equities might lose value.

On the flip-side, Citron as a newsletter company is ran by a popular Short-seller named Andrew Left; now what short sellers like Andrew do is watch out for stocks that are lower in price than their real value due to market perception, buy them and sell when the price rises again.

Now it might be a plot by Andrew to reduce the value of Jumia's stocks so he can purchase them and sell when all of it is clear,

We look forward to watching how this debacle to Africa's foremost E-commerce company pans out as they have continued to react to this news and you can get the PDF file of the report made by Citron Research below.

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