Citi Group Report Contradicts Citron’s Fraud Allegations Against Jumia

Citigroup Global Markets Inc., an investment bank for Jumia Technologies, has responded to fraud allegations levelled against the e-commerce company by a research firm, Citron Research.

Citi Group in its analysis of the allegation said claims by Citron were manipulated and recommended that Jumia make more disclosure of its performance.

The investment bank said it had become necessary to address the issues in view of the 50 per cent fall in the share price of Jumia at the New York Stock exchange and investors’ concerns over the validity of the allegations. Citron had accused the e-commerce company of falsifying figures in its filings at the stock exchange.

Citron research analysts led by its Founder, Andrew Left, had claimed a document called ‘Confidential Investor Presentation’ published by Jumia in October 2018, which was used for marking the company before the IPO, contained key financial metrics that were different from the Jumia filing with the NYSE.

Download the Citi report here.

Some questions addressed in the report include:

What to Make of the Citron Allegations?

“Some big claims. Citron Research yesterday published a presentation accusing Jumia of a number of misrepresentations.

“The share price has declined by over 50% since the presentation was published, with investors expressing concern over the substance of these allegations.

“Given Jumia’s short life as a listed entity and the volatility that has characterized Jumia’s share price since it went public in April 2019, we review and provide our initial assessment of these allegations.

A variety of allegations and sources:

“We assess six allegations and two additional statements made in the presentation. They largely consist of three types of information:

1) a reiteration of details from the prospectus;

2) claims that are difficult to evaluate as they are based on information from an unpublished investor memorandum, but which do not on the surface appear to contain strong evidence of fraud; and

3) references to news media articles, in some cases a few years old, alleging malfeasance at Jumia. We believe none appear to merit Citron’s description of a “smoking gun”.

Two points worth additional disclosures

“Of the allegations made, in our view two would seem to merit a response from the company, with disclosure in further detail on:

1) whether active user numbers were in fact restated, and on what basis; and 2) related-party transactions involving the co-CEO.

Most important: delivering in 2019.

“For investors, we believe the most important factor remains the company’s ability to deliver on its guidance, starting with Q1.

“We maintain our Neutral / High Risk (2H) rating on the shares, reflecting the significant growth prospects of the company, balanced by the inherent volatility of operating in early stage e-commerce markets. For more on our views on Jumia, see our initiation report.

Meanwhile, gathered that Jumia will later today release results of its earnings in the First Quarter of 2019.

This post was originally published here

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