Internet services company Opera came to see you under a short-sell assault based on allegations of predatory lending rehearsals by its fintech products in Africa.
Hindenburg Research produced a report claiming( among other things) that Opera’s investment concoctions in Nigeria and Kenya have run afoul of shrewd purchaser the procedures and Google Play Store rules for lending apps.
Hindenburg — which is based in NYC and administered by financial psychoanalyst Nate Anderson — went on to suggest Opera’s U.S. rolled inventory was grossly overvalued.
That’s a primer on the key info, although there were several additional tints of the who, why, and where of this story to break down, before getting to what Opera and Hindenburg had to say.
A good start is Opera’s ownership and scope. Founded in Norway, the company is an internet services provider, principally centered around its Opera browser.
Two years later, Opera went public in an IPO on NASDAQ, where its shares currently trade.
Though Opera’s web platform isn’t widely used in the U.S. — where it has less than 1% of the browser grocery — it has been number-one in Africa, and more recently a remote second to Chrome, according to StatCounter.
On the back of its browser popularity, Opera went on an African venture-spree in 2019, feeing a suite of products and startup verticals in Nigeria and Kenya, with intent to scale more broadly across the continent.
In Nigeria these include motorcycle ride-hail service ORide and bringing app OFood.
Central to these services are Opera’s fintech apps: OPay in Nigeria and OKash and Opesa in Kenya — which offer payment and giving options.
Fintech focused VC and startups have been at the center of a decade long tech-boom in several core economies in Africa, namely Kenya and Nigeria.
In 2019 Opera guided a motion of Chinese VC in African fintech, including $170 million in two rounds to its OPay remittances service in Nigeria.
Opera’s fintech makes in Africa( as well as Opera’s Cashbean in India) are at the core of Hindenburg Research’s brief and short-sell position.
The crux of the Hindenburg report is that due to the declining market-share of its browser business, Opera has rotated to produces engendering revenue from predatory short-term loans in Africa and India at interest rates of 365 to 876%, so Hindenburg claims.
The firm’s reporting goes on to claim Opera’s payment commodities in Nigeria and Kenya are afoul of Google rules.
” Opera’s short-term loan business appears to be…in violation of the Google Play Store’s programs on short-term and misinforming lending apps…we think this entire line of business is at risk of…being severely abridged when Google notices and ultimately takes corrective activity ,” the report says.
Based on this, Hindenburg proposed Opera’s stock should swap at around $2.50, around a 70% discount to Opera’s$ 9 share-price before the report was released on January 16.
Hindenburg likewise disclosed the house would short Opera.
Founder Nate Anderson confirmed to TechCrunch Hindenburg continues to hold short importances in Opera’s stock — which conveys the conglomerate receive benefits financially from diminishes in Opera’s share value. The company’s stock dropped some 18% the day review reports was published.
On motivatings for the brief,” Technology has catalyzed countless positive changes in Africa, but we do not think this is one of them ,” he said.
” This report identified issues relating to one company, but what we conclude will soon become apparent is that in the absence of effective neighbourhood regulation, predatory lending is becoming permeating across Africa and Asia…proliferated via mobile apps ,” Anderson added.
While the bulk of Hindenburg’s critique was centered on Opera, Anderson also took be targeted at Google.
” Google has now become the primary facilitator of these predatory lending apps by virtue of Android’s predominance in these marketplaces. Ultimately, our hope is that Google steps up and addresses the bigger issue now ,” he said.
TechCrunch has an open research into Google on such matters. In the meantime, Opera’s apps in Nigeria and Kenya are still available on GooglePlay, according to Opera and a cursory browsing of the site.
For its part, Opera issued a rebuttal to Hindenburg and offered some input to TechCrunch through a spokesperson.
In a company statement opera said,” We have carefully reviewed the report published by the short seller and such accusations it put forward, and our judgment is clear evidence: the report contains unsubstantiated announcements, countless inaccuracies, and misinforming agreements seeing our the enterprises and happenings applicable to Opera .”
Opera computed it had proper banking permissions in Kenyan or Nigeria.” We believe we are in compliance with all neighbourhood regulations ,” said a spokesperson.
TechCrunch requested Hindenburg’s Nate Anderson if the firm had contacted neighbourhood regulators related to its accusations.” We contacted out to the Kenyan DCI three times before pamphlet and have not heard back ,” he said.
As it pertains to Africa’s startup scene, there’ll be several things to follow surrounding the Opera, Hindenburg affair.
There’s also the open question of if/ how Google and regulators in Kenya and Nigeria could answer. Contrary to some impressions, fintech regulation isn’t non-existent in both countries, neither are regulators totally ineffective.
Kenya passed a new data-privacy law in November and Nigeria recently established guidelines for mobile-money banking permissions in their respective countries, after a lengthy Central Bank review of best digital investment practices.
Nigerian regulators demonstrated they are no pushovers with foreign entities, when they slapped a $3.9 billion punishment on MTN over a regulatory infringement in 2015 and threatened to eject the South African mobile-operator from the country.
As for short-sellers in African tech, they are a relatively new thing, largely because there are so few startups that have gone on to IPO.
In 2019, Citron Research front and partisan short-seller Andrew Left — remarkable for shorting Lyft and Tesla — made short-lived positions in African e-commerce company Jumia, after dropping a report accusing the company of certificates fraud. Jumia’s share-price sunk over 50% and has only recently begun to recover.
As of Wednesday, there are still mansions Opera may be shaking off Hindenburg’s report — at least in world markets — as the company’s shares had rebounded to $7.35.
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