Online retailer Jumia has been sued by Bragar Eagel & Squire, P.C. on behalf of purchasers of Jumia shares in the New York Stock Market between April 12, 2019 and May 9, 2019.
The case revolves around Citron Research report where Jumia was exposed as a fraudulent, worthless company.
The complaint alleges that throughout the Class Period (April 12 to May 9), Jumia made materially false and misleading statements about 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.
Jumia also failed to disclose true information about its orders, order cancellations, undelivered orders and returned orders lacked a sufficient factual basis and materially overstated the company’s sales.
Jumia also, according to the suit, failed to sufficiently disclose related party transactions and financial statements were presented in violation of applicable accounting standards.
In the report, it was alleged that Jumia had failed to state in their F-1 filing that 41 percent of orders were returned, not delivered or cancelled.
It was also alleged that Jumia ballooned its numbers before listing the US bourse since its key investors were leaving.
In a Jumia Confidential Presentation of October 2018, the retail company indicated that it had 2.1 active customers online, but inflated the numbers to 2.7 million in public reports.
The company also indicated that it had 43,000 merchants in the confidential report but in public it increased the numbers to 53,000.
“At the end of 2018, Jumia had a year’s worth of cash left and its two largest shareholders, MTN and Rocket Internet, wanted an exit. Therefore, Jumia filed for an IPO in March 2019, fudged its numbers, and began trading last month,” states the report in part.
In Nigeria, agents who normally place orders for clients were found to be involved in fraud. In the confidential report, Jumia wrote: “recently received information alleging that some of our independent sales consultants, members of our JForce program in Nigeria, may have engaged in fraudulent activities.”
However, this piece of information in the public domain was edited out. Fraud involving the independent agents could have contributed to the over 40 percent of goods rejected.