Opera and the firm short-selling its stock (alleging Africa fintech abuses) weigh in – TechCrunch
Internet companies firm Opera has come beneath a short-sell assault based mostly on allegations of predatory lending practices by its fintech merchandise in Africa.
Hindenburg Research issued a report claiming (amongst different issues) that Opera’s finance merchandise in Nigeria and Kenya have run afoul of prudent shopper practices and Google Play Store guidelines for lending apps.
Hindenburg — which is predicated in NYC and managed by monetary analyst Nate Anderson — went on to counsel Opera’s U.S.-listed stock was grossly overvalued.
That’s a primer on the key data, although there are a number of further shades of the who, why and the place of this story to interrupt down earlier than attending to what Opera and Hindenburg needed to say.
An excellent begin is Opera’s possession and scope. Founded in Norway, the firm is an web companies supplier, largely centered round its Opera browser.
Two years later, Opera went public in an IPO on NASDAQ, the place its shares presently commerce.
Though Opera’s internet platform isn’t extensively used in the U.S. — the place it has lower than 1% of the browser market — it has been No. 1 in Africa, and, extra not too long ago, a distant second to Chrome, in line with StatCounter.
On the again of its browser recognition, Opera went on an African enterprise spree in 2019, introducing a set of merchandise and startup verticals in Nigeria and Kenya, with intent to scale extra broadly throughout the continent.
In Nigeria these embody bike ride-hail service ORide and supply app OFood.
Central to those companies are Opera’s fintech apps: OPay in Nigeria and OKash and Opesa in Kenya — which provide cost and lending choices.
Fintech-focused VC and startups have been at the middle of a decade-long tech increase in a number of core economies in Africa, particularly Kenya and Nigeria.
In 2019, Opera led a wave of Chinese VC in African fintech, together with $170 million in two rounds to its OPay funds service in Nigeria.
Opera’s fintech merchandise in Africa (in addition to Opera’s Cashbean in India) are at the core of Hindenburg Research’s transient and short-sell place.
The crux of the Hindenburg report is that attributable to the declining market share of its browser enterprise, Opera has pivoted to merchandise producing income from predatory short-term loans in Africa and India at rates of interest of 365-876%, so Hindenburg claims.
The firm’s reporting goes on to assert Opera’s cost merchandise in Nigeria and Kenya are afoul of Google guidelines.
“Opera’s short-term loan business appears to be…in violation of the Google Play Store’s policies on short-term and misleading lending apps…we think this entire line of business is at risk of…being severely curtailed when Google notices and ultimately takes corrective action,” the report says.
Based on this, Hindenburg steered Opera’s stock ought to commerce at round $2.50, round a 70% low cost to Opera’s $9 share value earlier than the report was launched on January 16.
Hindenburg additionally disclosed the firm would quick Opera.
Founder Nate Anderson confirmed to TechCrunch Hindenburg continues to carry quick positions in Opera’s stock — which implies the firm may benefit financially from declines in Opera’s share worth. The firm’s stock dropped some 18% the day the report was printed.
On motivations for the transient, “Technology has catalyzed numerous positive changes in Africa, but we do not think this is one of them,” he stated.
“This report identified issues relating to one company, but what we think will soon become apparent is that in the absence of effective local regulation, predatory lending is becoming pervasive across Africa and Asia…proliferated via mobile apps,” Anderson added.
While the bulk of Hindenburg’s critique was centered on Opera, Anderson additionally took purpose at Google.
“Google has turn into the main facilitator of those predatory lending apps by advantage of Android’s dominance in these markets. Ultimately, our hope is that Google steps up and addresses the greater challenge right here,” he stated.
In an announcement to TechCrunch a Google spokesperson stated: “Our Google Play Developer Policies are designed to guard customers and preserve them secure, and we not too long ago expanded our Financial Services coverage to assist defend folks from misleading and exploitative private mortgage phrases. When violations are discovered, we take motion.”
Google didn’t verify if any particular motion could be taken relating to Opera’s fintech merchandise in Africa.
In the meantime, Opera’s apps in Nigeria and Kenya are nonetheless out there on GooglePlay, in line with Opera and a cursory browse of the web site.
For its half, Opera issued a rebuttal to Hindenburg and provided some enter to TechCrunch via a spokesperson.
In an organization assertion opera stated, “We have carefully reviewed the report published by the short seller and the accusations it put forward, and our conclusion is very clear: the report contains unsubstantiated statements, numerous errors, and misleading conclusions regarding our business and events related to Opera.”
Opera added it had correct banking licenses in Kenyan or Nigeria. “We believe we are in compliance with all local regulations,” stated a spokesperson.
TechCrunch requested Hindenburg’s Nate Anderson if the firm had contacted native regulators associated to its allegations. “We reached out to the Kenyan DCI thrice earlier than publication and haven’t heard again,” he stated.
As it pertains to Africa’s startup scene, there’ll be a number of issues to observe surrounding the Opera, Hindenburg affair.
The first is the way it might impression Opera’s enterprise strikes in Africa. The firm is engaged in competitors with different startups throughout funds, ride-hail and a number of different verticals in Nigeria and Kenya. Being accused of predatory lending, relying on the place issues go (or don’t) with the Hindenburg allegations, might put a dent in model fairness.
There’s additionally the open query of if/how Google and regulators in Kenya and Nigeria might reply. Contrary to some perceptions, fintech regulation isn’t non-existent in each international locations; neither are regulators completely ineffective.
Kenya handed a brand new data-privacy legislation in November and Nigeria not too long ago established tips for mobile-money banking licenses in the nation, after a prolonged Central Bank assessment of finest digital finance practices.
Nigerian regulators demonstrated they’re no pushovers with international entities, after they slapped a $three.9 billion advantageous on MTN over a regulatory breach in 2015 and threatened to eject the South African mobile-operator from the nation.
As for short-sellers in African tech, they’re a comparatively new factor, largely as a result of there are so few startups which have gone on to IPO.
In 2019, Citron Research head and activist short-seller Andrew Left — notable for shorting Lyft and Tesla — took quick positions in African e-commerce firm Jumia, after dropping a report accusing the firm of securities fraud. Jumia’s share value plummeted greater than 50%, and has solely not too long ago begun to get better.
As of Wednesday, there have been indicators Opera could also be shaking off Hindenburg’s report — not less than in the market — as the firm’s shares had rebounded to $7.35.
Update: This article was up to date for an announcement by Google post-publication.