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Reuters/Akintunde Akinleye
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RED OR GREEN?

Jumia is trying to take the high road on a short seller’s fraud claims

By Yomi Kazeem

The first quarterly earnings call after last month’s initial public offering offered Jumia executives a chance to push back against claims of alleged fraudulent dealings.

But in response to claims made by activist short seller Citron Research that the company made false disclosures in its S1 filing, Jumia told Wall Street it stands by its prospectus. Sacha Poignonnec, Jumia CEO, said the company is “transparent” and declined to respond directly to the claims made in the Citron saying, “We don’t necessarily want to feed those types of organizations or people”.

Beverly Hills-based Citron is known on Wall Street for making several claims of fraud and has faced calls to be investigated. Andrew Left, Citron’s founder, has been banned from trading in Hong Kong for making claims which are “false and misleading and likely to alarm ordinary investors.” News of the report exacerbated a decline in the stock price last week. The tumble was in contrast to its impressive soaring run after the IPO was first launched.

But investors seem to have been satisfied with Jumia’s response and its debut earnings as the shares have rebounded strongly over the last day. The stock [JMIA] closed up 8% at the end of business on Monday (May 13) and was set to continue an upward trajectory on Tuesday.

Billion dollar losses

As Jumia’s path to profitability continues to be sought after, one key figure that will likely concern investors more than others in the earnings report is the operating loss which widened year on year. In fact, the $51 million (€45.5 million) operating losses in the first quarter of 2019 means Jumia has now accumulated over $1 billion in losses since inception in 2012.

But as it looks to get its investor appetite back on track for its stock, Jumia will hope other numbers in its earnings results inspires some confidence. The company touted strong year on year growth in gross merchandise volume (GMV) growth (58%) to €240 million ($270 million). GMV is non-standard accounting metric Jumia uses to show “the total value of orders including shipping fees, value added tax, and before deductions of any discounts or vouchers, irrespective of cancellations or returns.”

It said its active users grew to 4.3 million at the end of the quarter from 3 million a year ago while total revenue grew by 12.3% to €31.8 million ($35.7 million). Gross margins on GMV rose slightly to 6.5% from 5.6% a year earlier.

Jumia talked up a partnership between Jumia Pay, its in-house payment solution and Mastercard for the development of branded products, including cards and quick response codes, as part of Mastercard’s recent €50 million investment.

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