JUMIA Group, which trades under the ticker symbol JMIA on the New York Stock Exchange (NYSE), released its first quarter earnings report on 13 May 2019. One of the highlights reported by JUMIA was that they experienced a 102% growth in revenue for its marketplace offering compared to the same period last financial year.

However, the pressing issue was that relating to the fraud allegations made by Andrew Left of Citron Research which resulted in JUMIA's share price taking a heavy hit last week.

"Then on the failed delivery; these are normal features of an e-commerce business and for us we have cancellations, failed deliveries and returns and those are expected to be higher in the nation's e-commerce markets where the majority of the business is still cash on delivery. And for us this actually represents monetization upsides, because today we carry certain costs on those transactions without booking a corresponding revenue, so of course we see the upside there," said Sacha Poignonnec, co-CEO and co-Founder of JUMIA Group, during the e-commerce company's Q1 earnings conference call when responding to a question on the allegation by Citron Research that the e-commerce company omitted to mention in its F-1 filing with the SEC that 41% of orders were returned, not delivered, or cancelled.

Although Poignonnec went past this question quickly during the earnings conference call, it's important to note that he, nor anyone else from JUMIA on the call, didn't deny this allegation by Citron Research.

E-commerce in Africa

The business of e-commerce is still in its early stages across the continent. With penetration at 1%, as Poignonnec mentioned during JUMIA's earnings conference call, there is still a long way to go before many of the e-commerce companies can start reaping real rewards from their investments.

Some of the key challenges for e-commerce companies revolve around underdeveloped infrastructure and logistics. This is the reason why, in South Africa, the country's largest e-commerce company owned by Naspers, Takealot, has gone on to open its own physical pickup points for customers to collect products they ordered instead of relying on the country's post office system.

For JUMIA, this is no different. Especially as it identified Nigeria and Egypt as its two largest markets.

JUMIA fraud allegations

Apart from not denying that they didn't file the 415 of orders are returned statistic, JUMIA also didn't out right deny the fraud allegations. Instead, P made at a statement at the beginning of the earnings call saying that they stick to their prospectus and all the information presented in it.

“We will not be distracted from executing on our strategy and carrying out our mission by those who seek to create doubts to profit at our expense and that of our long-term stakeholders,” added Poignonnec.

However, after the release of the report by Citron Research and after going through JUMIA's first quarter results, some investors and traders are still not buying JUMIA's numbers.

"$JMIA is yet another example of con artists fleecing gullible investors!  Its ER headline states marketplace revenue grew 102% YOY but if you account for commissions and other expenses, total revenue grew just 12.3% YOY!  If its too good to be true, then it almost always is!" wrote Puru Saxena, a growth stock investor.