Allege fraud: Jumia denies wrongdoing, stands by prospectus
Aftermath of the fraud allegation leveled against Jumia Technologies AG by Citron Research that the ecommerce platform misrepresented facts in the process of listing its stock on the New York Stock Exchange, Juliet Anammah Chief Executive Officer Jumia Nigeria has said that the management stands by its prospectus.
In April 2019, Jumia successfully went public on the New York Stock Exchange (NYSE) and raised $196 million in net proceeds. The share price, initially offered at $14.50, rose more than 200% in the first three trading sessions.
Juliet said that Nigeria account for some 25% of the Jumia Technologies AG, an ecommerce platform that is currently operating in 14 market in Africa. Delivering note at the press conference in Lagos, Anammah said that you can create a very interesting stories to bring down Africa if you mention “fraud and corruption”.
“All you need to do to destroy Africa brand is to mention two magic words: “fraud and corruption”, and everyone would say yes, it is exactly what we know Africa to be and you can create a very interesting story about it.
“So, let me say categorically that we stand behind our prospectus. The disclosure we made in our prospectus represents our business and the risk related to our business. A prospectus was issued a month before the listing as standard practice”.
That way, you allow investors to have a look at your business, your projections; the risk you have identified and make an informed decision to invest or not.
It would be recalled that Andrew Left, Executive Editor at Citron Research picked holes in listing process of Jumia on the NYSE, and later told the MarketForces in an email that the stock worth is zero.
Citron Research’s Andrew Left, a noted short seller, alleged in a report that it has the “smoking gun” that shows why Jumia equity is “worthless.” The report stated that in 18 years of publishing, Citron has never seen such an obvious fraud as Jumia.
The research firm goes on to highlight what it calls “material discrepancies” between the confidential investor presentation from October 2018 and what the company told the Securities Exchange Commission (SEC).
The differences include: inflating active customer and active merchant numbers by 20% to 30%; and that 41% of orders were returned, not delivered or canceled. Among the risk factors highlighted in the IPO prospectus was the fact that many deliveries failed. Jumia said that 14.4% of GMV in 2018 either failed to deliver or was returned.
“Assuming 41% of orders were returned, not delivered, or canceled in 2018, this implies that almost 30% of orders were canceled in 2018,” Citron wrote. “Since Jumia primarily sells consumer electronics, which should not have this high of a cancellation rate, it wreaks of fraud.”
“I think the value of the stock is zero. I am putting out a follow up today that rehashes my point. I cannot show the deck as it is watermarked. Most importantly I am sorry that the Germans and French have orchestrated this fraud which is a poor reflection on a country that is battling the reputation of corruption. I will address that in part two”, Andrew said in an email.
Though Jumia is yet to file lawsuit against Citron Research, More and more United States law firms are riding on the reports that alleged that Jumia listing on the New York Stock Exchange, NYSE, was a fraud.
MarketForces gathered that many of the United States law firms with interest in investors’ protections have started filing lawsuits. The law firms are asking investors who has lost $100,000 to come forward as they announce investigation into Jumia Technologies AG.
“We have identified more than ten firms in one day, claiming to join suit against Jumia”, Analysts at MarketForces said.
Among the law firms that have initiated legal proceeding against the company include but not limited to Robbins Geller Rudman, Scotts-Scotts, Glancy Prongay & Murray LLP and many others.
Robbins Geller Rudman & Dowd LLP files Class Action Suit against Jumia Technologies AG. The complaint charges Jumia and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that during the Class Period, defendants made materially false and misleading statements about Jumia and its business.
“These statements are alleged to be materially false and misleading because they failed to disclose that Jumia had materially overstated its active customers and active merchants; the ecommerce representations about its orders, order cancellations, undelivered orders and returned orders lacked a sufficient factual basis and materially overstated the Company’s sales; failed to sufficiently disclose related party transactions; and that Jumia’s financial statements were presented in violation of applicable accounting standards”.
“Plaintiff seeks to recover damages on behalf of all purchasers of Jumia ADSs during the Class Period. The plaintiff is represented by Robbins Geller, which has extensive experience in prosecuting investor class actions including actions involving financial fraud”.
Glancy Prongay & Murray LLP , a national investors rights law firm, also announced that a class action lawsuit has been filed on behalf of investors that acquired Jumia Technologies AG securities between April 12, 2019 and May 9, 2019, inclusive.
Is Jumia an African company?
Ownership structure of Jumia says different thing from normal narrative on the street. At the press conference, Juliet Anammah, CEO overseeing operation in Nigeria attributed ownership to Africa.
Andrew Left told MarketForces in an email that; “…the Germans and French have orchestrated this fraud which is a poor reflection on a country that is battling the reputation of corruption”.
MarketForces observed that; in the prospectus, key shareholders with more than 5% ownership as identified were from Germany, French, Luxembourg and MTN group in South Africa owns 29.7% before the listing.
A review of the prospectus shows that Jumia was incorporated on June 26, 2012 as a limited liability company under German law. According to Jumia, the prospectus revealed that on December 17 and 18, 2018, the firm shareholders resolved upon the change of our legal form into a German stock corporation and the change of our company name to Jumia Technologies AG.
“The change of our legal form and company name became effective upon registration with the commercial register of the local court in Berlin, Germany, on January 31, 2019. We are registered with the commercial register of the local court in Berlin, Germany, under number HRB 203542 B. Our corporate seat is in Berlin, Germany, and our registered office is at Charlottenstraße 4, 10969 Berlin, Germany”, the company prospectus stated.
It was discovered that Mobile Telephone Networks Holdings Limited, a company organized under the laws of South Africa with company number 1993/001411/06 owns 29.7% shares in Jumia.
The prospectus reads that the Mobile Telephone Networks Holdings Limited is a wholly owned subsidiary of MTN Group Limited, which may be deemed to have beneficial ownership of all of these ordinary shares.
Also, AEH New African ecommerce I GmbH, a company organized under the laws of Germany with company number HRB 162781 B owns 8.4% shares in Jumia. AEH New Africa ecommerce I GmbH is a wholly owned subsidiary of AEH New Africa ecommerce II GmbH, a company organized under the laws of Germany with company number HRB 163306 B, which may be deemed to be the beneficial owner of all of these ordinary shares. The business address of both AEH New Africa ecommerce I GmbH and AEH New Africa ecommerce II GmbH is Charlottenstraße 4, 10969 Berlin, Germany.
In the list was Atlas Countries Support S.A., a company organized under the laws of Belgium with company number 0568.968.148 RLE owns 5.8% of Jumia shares. Orange, a limited liability company registered under the laws of France, is the ultimate parent company of Atlas Countries Support S.A.
The prospectus reads that Orange may be deemed to be the beneficial owner of all of these ordinary shares.
Another shareholders identified was AXA Africa Holding S.A.S., a company organized under the laws of France with company number 799.163.845 owns 5.8% of Jumia shares. AXA Africa Holding S.A.S. is a wholly owned subsidiary of AXA S.A., which may be deemed to have beneficial ownership of all of these ordinary shares.
Chelsea Wharf Holdings S.à r.l., a company organized under the laws of Luxembourg with company number B 170759 owns 5.2% shares of Jumia. Chelsea is a wholly owned subsidiary of Blakeney General Partners III Limited, which exercises voting and investment power over the ordinary shares held by Chelsea Wharf Holdings S.à r.l. Blakeney General Partners III Limited may be deemed to have beneficial ownership of all of these ordinary shares.
Millicom International Cellular S.A., a company organized under the laws of Luxembourg with company number B40630 owns 9.6% of Jumia stock. The firm may be deemed to have beneficial ownership of all of these ordinary shares.
Pernod Ricard Deutschland GmbH, a company organized under the laws of Germany with company number HRB 38302 owns 5.1% of the stock. The company is a wholly owned subsidiary of Pernod Ricard SA, which may be deemed to have beneficial ownership of all of these ordinary shares.
Rocket Internet SE, a company organized under the laws of Germany with company number HRB 165662 B owns 20.6%. The business address of Rocket Internet SE is Charlottenstraße 4, 10969 Berlin, Germany. Rocket Internet SE is the beneficial owner of all of these ordinary shares.
Meanwhile, Anammah said that the group is reviewing whether it will slam lawsuit against Citron Research.
Citron report has caused a run on the firm’s stock, following the publication. Jumia’s shares declined $6.22 per share, or nearly 19% in value, to close on May 9, 2019 at $26.89 per share. Since after then, the company’s shares continued to decline in value.