Jumia under fire for falsifying sales figures to the tune of $18 million as losses widens

Jumia

NYSE-listed and African-focused eCommerce company, Jumia Technologies AG has now admitted that there were improper sales practices at its Nigerian operations.

The admittance of wrongdoing by the Africa-focused eCommerce company has generated a huge controversy given the fact that the inflated sales figures were estimated at $18 million.

In a statement issued late yesterday, the company said: “improper orders were placed and subsequently canceled.”

This negative information is coming as the company disclosed that it suffered a total of N27 billion in second-quarter losses.

The company said the falsification was about 4% of first-quarter sales (Q1 2019). This was around the same period the company was preparing for its New York Stock Exchange IPO.

The eCommerce company said the falsification was made through deals made through a team of independent Nigerian sales consultants called J-Force. The transactions in question amounted to 2% of 2018 gross merchandise volume.

The admittance of wrongdoing is coming on the heels of Jumia’s loss-making first-quarter result which could complicate its half-year result.

For its second-quarter result, Jumia said its losses rose by 60% to 66.7 million euros. While the company blamed an increase in costs related to the vesting of share options following the IPO, the result further shows Jumia is many more years away from profitability. Jumia’s first-quarter result also showed that its negative adjusted EBITDA rose to €39.5 million compared to €30.2 million loss reported in 2018 within the same period.

However, Jumia has now canceled its target of profitability for this year to 2022. It would be recalled that Jumia’s CFO had in 2016 said in an analyst call that Jumia would break-even in 2019.

The admittance of wrongdoing in its sales practices seems to tally with the allegations of Citron Research.

Few months after its initial public offering, Citron published research which alleged that Jumia’s active customer base, as well as other metrics, were falsified in the filings for the IPO.

While Jumia did not respond to the report, Citron challenged the company to a public debate and promised to donate a total of N100 million to a Nigerian charity should Jumia accept the challenge.

In the preamble to the report, Citron said:

“In 18 years of publishing, Citron has never seen such an obvious fraud as Jumia. As the media in the US is naively anointing Jumia the “Amazon of Africa”, the media in its home country of Nigeria has a plethora of articles discussing the widespread fraud in this Nigerian company. Not even that elusive Nigerian prince can cover this one up.

Jumia is the worst abuse of the IPO system since the Chinese RTO fraud boom almost a decade ago. Worse than being “the most expensive” US listed e-commerce company, Jumia reported financials show us a stagnant business that has burned through $1 billion and has moved the suckers game to the US Markets.

In this report, Citron will expose the SMOKING GUN and show why the equity is WORTHLESS. We believe investors cannot rely on reported numbers and a restatement of financials is on the horizon. The SEC must protect US Investors.”

Based on Citron’s report, if the evidence presented is found out to be through, executives at the company could be indicted for securities fraud.

This is because Citron cited a confidential investor presentation that allegedly presented different figures to investors compared to the company’s filings with US Securities and Exchange Commission, SEC.

“Citron has obtained a copy of Jumia’s confidential investor presentation from October 2018 that was being used to market to investors late last year and is NOT what they told the SEC.”

“We will present some of many MATERIAL DISCREPANCIES in reported key financial metrics when comparing this confidential document with Jumia’s F-1 filing from last month.”

“When a company markets to investors ahead of its IPO and then a few months later omits material facts and makes material changes to its key financial metrics to make the business seem viable, this is SECURITIES FRAUD.”