Jumia Stock Hits All-Time Low, Crashes Well Below IPO Price Amidst Fraud Allegations
Prominent ecommerce startup, Jumia has had a rough time on the New York Stock Exchange recently. For the first time since it was listed, its share price has fallen below its initial listing price.
The startup was listed in April and began trading at $14.50 per share which in its first day soared as high as $22.45. But according to a report by Quartz, the startup’s share price crashed to its lowest at $14.02 per share but recovered to close at $14.57 this Monday. And the fall didn’t end there as it once again fell by 1.7% to trade at $14.31. At the time of filing this report, the share price has fallen to its lowest yet at $13.44.
This recent trend is a sharp contrast to its initial days on the NYSE where in less than a week to its IPO, it was trading at about 3 times its IPO price – over $40 per share.
So What Caused This Fall?
It all began when Citron Research, a stock market analysis company, accused the ecommerce giant of fraud and published a report calling the Jumia stock “worthless”. According to Citron, the startup had fraudulently increased key figures, such as number of users and number of merchants, prior to its listing.
Immediately after this report was released, the ecommerce startup hit a rough patch on the stock market as its share price crashed from $42.37 to $18.13 in a week, but had a rebound to close at $24.50.
A few days after the reports by Citron, Jumia released its first quarterly earnings, which indicated growth on its side.
But this latest crash has come from a weak run for most of July which resulted in a downward price trend and several days of consecutive losses for the startup. This kind of indicates that the startup has not been able to dispel the accusation properly.
Another indicator that could have caused the crash is the Trump administration’s ongoing trade war with China. According to Quartz, Jumia shares, when compared with the S&P 500 Index suggests that its decline is in line with a recent downturn in the wider market. But while the share prices of S&P 500 has rebounded in June/July, Jumia’s price hasn’t.
Jumia Under Investigation
According to Quartz, two law firms have issued press releases claiming Jumia is under investigation and neither Jumia or the Securities Exchange Commission has come out to say anything. This silence means a lot and affects investor perceptions.
Moving forward, to ensure the sustainability of its share price, the unicorn startup will need to come out and provide more information to investors so that they feel safe. It will also need to show a sustainable path to profitability to help stabilize its shares.
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