US opens fraud probe on Jumia

US investigators have launched a probe on Jumia-an online shopping firm, for suspected fraud.

Holzer & Holzer, an investments fraud investigator, announced that it had opened a probe into suspected padding of Jumia’s finances prior to listing, including understatement of order cancellation and returns.

The announcement saw Jumia's shares slump to their lowest levels since its listing on the New York Stock Exchange (NYSE) last month.

By the close of trading on Friday, a share of the company which has operations in several African countries including Kenya had tumbled to $24.50 (Sh2478) – half of the peak reported on May 1.

Jumia operates an online shopping platform linking customers and appointed sellers, from where it earns a commission.

The firm collects goods from merchants after receiving orders and delivers these to customers. It then transmits the money paid, less its commissions, to the merchants.

However, there are cases of customers cancelling orders midway or even rejecting the products. It is such information that Jumia is suspected of making partial disclosures which might have led to overstating its valuation at the time of the Initial Public Offering in April.

Holzer & Holzer has already requested for complaints from the investors who bought into Jumia in a potential class action against the original owners and managers.

Nigeria, where it was founded by Sacha Poignonnec and Raphael Kofi Afaedor, is Jumia's largest market, besides 17 countries across Africa.

Should the findings of the investigation conform fraud, the firm would suffer significant loss of confidence and lower valuation at the NYSE.

Jumia raised Sh20 billion ($196 million) from the April 12 IPO from the sale of 13.5 million shares at $14.50 (Sh1,466) a piece.