Citi Reacts on Jumia’s Citron Allegations [Download Citi Report]

Citi Reacts on Jumia’s Citron Allegations [Download Citi Report]

Citi has a really brilliant update on the “fraud” allegations against Jumia by Citron Research. Yet, it concluded by expecting Jumia to respond on two key ones. One of those was the only issue I have personally felt should be a concern. Other allegations are largely fire without smoke. As I have noted, the next two quarterly earnings should be the focus of markets. Citi made the same point, asking market to give Jumia this 2019 to demonstrate itself. Download the Citi report here.

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of details from the prospectus; 2) claims that are difficult to evaluate as they are based on information from an unpublished investor memorandum, but which do not on the surface appear to contain strong evidence of fraud; and 3) references to news media articles, in some cases a few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.


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