Cornerstone Crumbs: Rampant Market Manipulation

"The Lord bless you and keep you;

The Lord make His face shine upon you,

And be gracious to you;

The Lord lift up His countenance upon you,

And give you peace."

Numbers 6: 24-26

Citron Research has been known for their terrible calls (attempts to manipulate the market) over time. Shopify, Inc. (SHOP) comes to mind with PTs in the $100s. However, Citron has taken a completely different "if you can't beat them, join them" approach with respect to Jumia Technologies (JMIA).

Upon Jumia going public back in 2019, Citron Research's coverage called the company a straight out fraudulent operation. Jumia's SP reached highs near $50, only to crater all the way down to the $2 level. Jumia benefited tremendously during the pandemic with the SP peaking near $70 in February of this year. The SP recently dropped to a low-point at just below $10.

Citron has changed their tune on Jumia after it fell into the single digits calling for a bullish thesis. Their most recent statement today being:

Citron Research, which has previously expressed a positive view on Jumia, tweeted: "$JMIA could this be the start? Black Fri stats show the inflection. Largest Pan African platform co. Does not need $$ and years in front of comp. Insider buying - stock could be $22 before earnings. Asymmetrical risk/reward. . Not an easy road -but when it hits- POW

Clearly, the pump is on with Jumia up over 8%. The problem I have with Jumia is the simple fact that the "inflection" is extremely weak. Jumia's Revenue growth as of the LTM is up 5% for 2021. The company has no public analyst estimates as their growth is petty and their baseline of Revenue is very small.

The company is on track to eclipse the $150 million mark for Revenue, while burning around $135 million in Cash for 2021, equating to a negative 90% FCF margin. Again, looking at a company like Shopify that grew from $200 million to $3 billion in five years, and has witnessed Cash Flow inflection from negative to 15% of late, Jumia has a very, very, very long way to go and the $580 million Cash balance is not going to be enough to carry the company towards its future.

I am shocked that the SEC doesn't disallow blatant stock market manipulation (that's a joke!). The one thing that needs to be done is proving full transparency of trading on a daily basis. For a day like today, the important element needed is to see who all is involved in the scheme. If retail investors were able to see how the system is gamed, then they would be better prepared to not fall into the trap.

Even if Jumia is able to grow towards $200 million in Revenue in 2022 (this is highly questionable), a fair valuation of the company would be around $8. The contradiction with Citron Research is a major red flag. This is a short-oriented hedge fund that has flipped the switch, not based on any fundamentals or analysis, but simply based on a strategy to make money and take advantage of unsophisticated investors.

I believe that Jumia is worth around $20 by 2026, if the company is capable of generating $600 million in Revenue that would equate to a five-year annualized 30%--plus growth rate. There is a likelihood that Jumia would still be burning Cash at this level. Jumia was overvalued at $10 and is extremely overvalued more so today. The risk/reward profile is terrible and investors buying now will be set up for a major loss in the near-term.

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