E-commerce company, Jumia, revealed in its 2020 Q2 results, that it had come to an agreement that would bring the class action lawsuit against it to an end.
Jumia listed on the NYSE, in 2019, to a mixture of excitement and skepticism. It was not long until allegations of impropriety in some of its reported numbers leading up to the listing were reported.
The firm was soon on the receiving end of numerous class action lawsuits filed against the company, as well as current and former members of its supervisory and management boards.
The lawsuits claim that Jumia committed securities fraud in connection with Jumia’s misleading reporting of numbers before its initial public offering. They were filed in the U.S. District Court for the Southern District of New York and the New York County Supreme Court.
After a tumultuous year that has seen Jumia shut down operations in numerous African countries, Jumia revealed in its report that it had agree to pay a 5 million dollar settlement, a million of which comprises insurance. The settlement however comes without any admission of impropriety.
Under the section titled “litigation update”, Jumia’s Q2 Report read, “On August 11, 2020, we reached an agreement to fully resolve all of the actions, subject to standard conditions including court approval.
Under this agreement, in which the defendants do not admit any liability or wrongdoing, Jumia will make a settlement payment of USD 5 Mn, USD 1 Mn million of which will be funded by insurance coverage.”
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Jumia had earlier admitted that there had been some instances of fraud internally, where orders were improperly placed on the part of its JForce sales agent network in Nigeria.
The company however insists that the fraudulent orders, which generated around USD 17.5 Mn in gross merchandise volume (GMV) value within less than a year, did not impact its financial statements.
Acknowledging that the reported GMV figure for Q2 2018 had been adjusted in light of the improper transactions barely boosted investor confidence in the company.
The resulting losses saw the firm exit several underperforming countries.
