Jumia suffers major setback, shuts Cameroon operations, records losses
Africa e-Commerce company, Jumia, has closed down operations of its Cameroon subsidiary, Jumia Cameroon. This is coming less than a week after Jumia released its Q3 financial report in which it recorded losses.
Jumia has been in the news for much of this year for bad reasons. The shut down of Jumia Cameroon thus adds to the growing list of trouble for the e-commerce multinational which had earlier closed shop in Gabon and Congo Republic.
According to Jumia, the move is necessary as its current model is not suited for the country.
“We came to the conclusion that our transactional portal as it is run today is not suitable to the current context in Cameroon. We wanted to see how business evolved. We can come back, but for now we’re closing (to have) time to study the market.” It did not announce when it will make a return to Cameroon market, if at all.
Jumia operation has been trailed by losses and this latest shut down may be an attempt by the company to cut back on its operational cost.
The recently released Q3 financial report indicates that Jumia lost $55 million in the 3rd quarter of this year, bringing its total loss recorded for this year to $180.1 million, and about $1 billion since inception.
The operational losses have been spurred by the company’s attempt to grow its various verticals in all its markets in Africa. Jumia is yet to become a profitable company and analysts fear that the persistent losses may delay its breakthrough.
Jumia’s troubles are mostly internal. Its recent poor run on New York Stock Exchange, which has seen it experience a significant drop in shares has not also helped matters.
The e-commerce company was accused of many infractions including that:
(i) Jumia had materially overstated its active customers and active merchants;
(ii) Jumia’s representations about its orders, order cancellations, undelivered orders and returned orders lacked a sufficient factual basis and materially overstated the Company’s sales;
(iii) Jumia failed to sufficiently disclose related party transactions; and
(iv) Jumia’s financial statements were presented in violation of applicable accounting standards.
On or about April 12, 2019, Jumia sold 13.5 million shares of stock in its initial public offering (the “IPO”), at $14.50 per share raising $196 million in new capital.
Trouble started when on May 9, 2019, Citron Research, a respected firm with a history of indepth research in stock markets and investments, published a report accusing Jumia of overstating certain financial metrics in its April 2019 IPO prospectus and omitting adverse information about the number of returned, undelivered, or canceled orders from the prospectus.
On the strength of this information, Jumia’s share price fell $6.22 per share, approximately 18.8%, to close at $26.89 on May 9, 2019.
Kirby McInerney LLP had put out a notice to concerned shareholders to fill out a contact form which it intends to aggregate to discuss the rights or interests of the shareholders with respect to the matter at no cost to the investors
Kirby McInerney has a rich history of litigation on behalf of investors in securities. The firm’s efforts on behalf of shareholders in securities litigation have resulted in recoveries totaling billions of dollars.
Which is probably what moved the board to close its Cameroon subsidiary – in a move to cut down on the cost of operations and stop the massive bleeding of funds. And its Cameroon subsidiary is, unfortunately, the victim. It is reported that since last year, growth has sharply declined following the socio-economic and political crisis in the Central African country.
Before 2018, the space is reported to have been experienced strong growth.
Jumia shut down its Cameroon operations this morning, firing its entire staff, no public announcement, no special word from the group or its CEO. The brutality of the news to the staff echoes their management style and is, I believe, one of the reasons for its demise.
This closure sees Cameroon become the 3rd Central African subsidiary to be closed following that of Congo and Gabon. The eCommerce company had also exited Rwanda last year, closing down its business save its food delivery service in the country.
All these sees the company’s African market reduced to 13 – Nigeria, Kenya, South Africa, Egypt, Ghana, Morocco, Uganda, Tanzania, Senegal, Rwanda, Ivory Coast, Tunisia, and Algeria.