Following a claim of fraud by a short seller, shares in eCommerce firm Jumia fell by almost 25 percent by midday New York time on Friday (May 10) and traded at $20.30 at one point, the Financial Times reported. The stock, however, was trading higher – at $25.78 – as of 3:43 p.m. EST, according to Yahoo! Finance.
Short seller Citron Research claimed, according to reports, that it had a confidential presentation Jumia made to investors in October. It said there were “material discrepancies” between the numbers the company reported in April in its initial public offering (IPO) filing and the presentation.
Citron claims the company inflated its active merchant numbers as well as its active customer base. It also says that 41 percent of deliveries were not delivered, canceled or returned. Citron alleged, according to the report, “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.”
The report pointed out that Citron puts out “damning reports” about firms in which it has taken a short stake. The firm became well-known after it targeted Valeant, a pharmaceutical firm. That company’s stock price tumbled following fears over a heavy debt load and accounting practices.
On Jumia’s first day of trading, the company’s shares jumped some 54 percent, trading at about $22 per reports in April. The company, which is often called the Amazon of Africa, was valued at about $1.7 billion. Jumia became the first African unicorn startup in 2016 after a $326 million funding round that included AXA, MTN and Goldman Sachs.
The company filed for an initial public offering (IPO) on the New York Stock Exchange in March. Jumia operates in 14 African countries such as Ivory Coast, Morocco, Ghana, Kenya and Egypt. Some of the brands in its lineup encompass travel booking service Jumia Flights, online takeout service Jumia Food and classified services Jumia Deals.