position proof IPO and Shitron I guess to start off Ill preface with the Shitron and Jumia IPO dilemma. Andrew Left is a short seller being used a signal for short and distort attacks that he may be in cohorts with, with other funds. The idea of him being a single individual with poor grammatical prowess is a front. Based on borrow fees it is likely Left and friends shorted at IPO with possession of information that he gained either through corroboration with others, purchased, etc. He released the hit piece that I summarize and comment on below. That hit piece took JMIA from $50 to $2. The reason for such a violent decline is multifactored, that derives from the Citron report, legitimate financial struggles, and lastly (but just as important) is just how low the JMIA float is. They IPO’d with just 13 Million shares. A short and distort attack on a stock that will inherently already be volatile, is what did JMIA in. There were not enough shares to go around, making it easier to manipulate. Coincidentally (or not) it was one of the first plays on Citrons new hedge fund. Jumia did have a recent dilution, but they still sit as one of the lowest multi-billion-dollar companies in the market in regards to share float. It puts them along the lines of SEB and BRKA. To put things in perspective the float of your favorite meme stock (e.g., QS, NIO, etc. is anywhere from 10 to 200 times larger).
https://imgur.com/a/gXRAeYS
In summary of the report Shitron and Co. claimed the following
Securities Fraud and Smoking Gun Accuses JMIA of wanted to do what every other IPO is interested in which is raising funds and allowing original investors to exit. The modus operandi of Rocket Internet is to start these startups and exit early on them. The MTN exit was likely related to debt reduction as around that time they were ordered to pay over $1B USD in fines to Nigeria. They also tried to tack on the sale of Konga by Naspers, that it being a 90% loss is a signal. This is actually not true as the sale was undisclosed, there is NO source that this was what was lost. However, if we assume it’s true Naspers a $90B dollar company lost less than $80 million on Konga, based on its total investments.
http://www.chinagoabroad.com/en/article/r20-billion-jumia-ipo-could-help-mtn-reduce-debt-burden They claim to present “some of many MATERIAL DISCREPANCIES”, which we can assume what is presented is the WORST discrepancy that exists: Claimed that the 20%-30% discrepancy in users in filings is fraud: This statement was unsourced with a link, claiming it came from an “anonymous” source. Realistically the data was separated by over a span of 6 months (or two quarters). Since being listed and reporting users this has been the average growth in users falling in line with the alleged discrepancy in user data. There has also been commentary that this is more of a reporting issue in terms of differing definition of sellers/merchants.
High returns, failed deliveries, and cancellations: The return rate of 14% is actually not that high. Retail products at the consumer level have high return rates. The failed delivery rate is a result of the cash system that is employed in some communities. It requires a person to person confirmation, lack of communication results in a high number of failed deliveries. He later mentions this and sources the SEC document that this also results in financial losses in terms of delivery payment theft, but doesn’t mention that literally directly after that statement, that the issue has been corrected with the development of a payment processor.
https://www.cnbc.com/2019/01/10/growing-online-sales-means-more-returns-and-trash-for-landfills.html History of fraud in Nigeria The source on this is an odd one, but regardless of validity, the amount allegedly stolen was small ($4m) and neither employee is still employed. The stock market is filled with companies that are thriving with past, present, and future reports of fraud at significantly higher magnitudes.
In terms of the sketchy sale to Jeremy hondra, I cannot find a source on it, not even the quotes. So, I can’t comment on it in-depth, but I will say that “$1” business sales are not unheard of. It's likely those businesses were losing significantly more than $3m a year and JUMIA and its other investors thought it was worthwhile to bring back, or it was a part of whatever agreement existed between the two.
Lack of audit The stock was underwritten by JP Morgan and others, it would be in their financial interest that everything checks out with JMIA. Shitron implies in their statements that the alleged Nigerians under Ernst and Young (EY) can’t perform an audit. In the same document EY says they conduct audits to the standard of the “Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB… Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
They go on to say that
“As part of our audits we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.”
The report makes it seem like it's an unaudited business. The source link doesn’t even take you to the right page. Either way audits of Jumia are currently available.
https://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE\_JMIA\_2019.pdf Long Perspective With that being said Andrew Left and friends recently reversed their opinion and gave it a $100 price target. Some say it is genuine others think it's just to double dip and short it again. I personally don’t give a fuck what his intentions are. In the short term, it’s a part of what caused Octobers the run-up, in the long run, “stonks only go up”. But more seriously, citron’s value is using his career clout to acquire information, and strategically short these companies. Its not really in his MO to change opinions publicly unless he wants that information to be publicly held. In the sense that he wants the public to know and as a trader you understand that’s that what he wants, but I never really think past that.
As for JMIA I’m going to save the talk on “African Amazon”, especially considering amazon income is from being a cloud computing company more than it is a retail store. Also, while I disagree with Citron’s allegations, I do agree with the theme that Jumia is dysfunctional. But I’ve only ever made money off dysfunction, and the dysfunction of Jumia is just a reflection of Nigeria and not JUMIA the company. In fact, I take Jumia’s ability to function in Nigeria as a positive sign. While they’ve hemorrhaged money in the past and continue to do so they are on the path to profitability, with EPS increasing quarter after quarter, and little long term and short-term debt. The value of Jumia has been linked to the expected growth of Nigeria but I have zero hope in Nigeria. The value of Jumia will actually be in its expansion in east and north Arica. Amazon has already in the region of North Africa with its buyout of souq. Net Income for Jumia is still increasing YoY in these regions as well with increased usage of Jumia’s payment processor. Online retail shopping will increase with increasing global access to the internet, especially with the maturation of starlink. The processor and logistics is also where I see the growth occurring especially if both services break away from being a Jumia exclusive, and becomes involved in some of the industrializations of parts of Africa. They have an upcoming earnings report Feb 9th that I believe it’ll hit ATH around said date. Over the past few months, institutions have been buying it heavily prior to the earnings. Part of the anticipation is increased adoption of JumiaPay under covid.
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