Web companies firm Opera has come beneath a short-sell assault primarily based 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 client practices and Google Play Retailer 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 inventory was grossly overvalued.
That’s a primer on the important thing information, although there are a number of extra 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.
begin is Opera’s possession and scope. Based in Norway, the corporate 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.
Although Opera’s net platform isn’t broadly used within the U.S. — the place it has lower than 1% of the browser market — it has been number-one in Africa, and extra just lately a distant second to Chrome, in keeping with StatCounter.
On the again of its browser recognition, Opera went on an African venture-spree in 2019, introducing a collection of merchandise and startup verticals in Nigeria and Kenya, with intent to scale extra broadly throughout the continent.
In Nigeria these embrace motorbike 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 targeted VC and startups have been on the middle of a decade lengthy tech-boom in a number of core economies in Africa, particularly Kenya and Nigeria.
In 2019 Opera led a wave of Chinese language 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 on the core of Hindenburg Research’s brief and short-sell place.
The crux of the Hindenburg report is that because of 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 to 876%, so Hindenburg claims.
The agency’s reporting goes on to say Opera’s cost merchandise in Nigeria and Kenya are afoul of Google guidelines.
“Opera’s short-term mortgage enterprise seems to be…in violation of the Google Play Retailer’s insurance policies on short-term and deceptive lending apps…we predict this complete line of enterprise is susceptible to…being severely curtailed when Google notices and in the end takes corrective motion,” the report says.
Based mostly on this, Hindenburg advised Opera’s inventory ought to commerce at round $2.50, round a 70% low cost to Opera’s $9 share-price earlier than the report was launched on January 16.
Hindenburg additionally disclosed the agency would brief Opera.
Founder Nate Anderson confirmed to TechCrunch Hindenburg continues to carry short positions in Opera’s inventory — which implies the agency may gain advantage financially from declines in Opera’s share worth. The corporate’s inventory dropped some 18% the day the report was printed.
On motivations for the temporary, “Expertise has catalyzed quite a few constructive adjustments in Africa, however we don’t suppose that is one in all them,” he mentioned.
“This report recognized points relating to at least one firm, however what we predict will quickly turn into obvious is that within the absence of efficient native regulation, predatory lending is turning into pervasive throughout Africa and Asia…proliferated through cellular apps,” Anderson added.
Whereas the majority of Hindenburg’s critique was centered on Opera, Anderson additionally took goal at Google.
“Google has turn into the first facilitator of those predatory lending apps by advantage of Android’s dominance in these markets. In the end, our hope is that Google steps up and addresses the larger challenge right here,” he mentioned.
TechCrunch has an open inquiry into Google on the matter. Within the meantime, Opera’s apps in Nigeria and Kenya are nonetheless out there on GooglePlay, in keeping with Opera and a cursory browse of the location.
For its half, Opera issued a rebuttal to Hindenburg and provided some enter to TechCrunch by means of a spokesperson.
In an organization assertion opera mentioned, “We’ve got rigorously reviewed the report printed by the brief vendor and the accusations it put ahead, and our conclusion may be very clear: the report incorporates unsubstantiated statements, quite a few errors, and deceptive conclusions concerning our enterprise and occasions associated to Opera.”
Opera added it had correct banking licenses in Kenyan or Nigeria. “We consider we’re in compliance with all native rules,” mentioned a spokesperson.
TechCrunch requested Hindenburg’s Nate Anderson if the agency 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 mentioned.
Because it pertains to Africa’s startup scene, there’ll be a number of issues to comply with surrounding the Opera, Hindenburg affair.
The primary is the way it might influence Opera’s enterprise strikes in Africa. The corporate is engaged in competitors with different startups throughout funds, ride-hail, and several other 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 brand-equity.
There’s additionally the open query of if/how Google and regulators in Kenya and Nigeria might reply. Opposite to some perceptions, fintech regulation isn’t non-existent in each international locations, neither are regulators completely ineffective.
Kenya handed a new data-privacy law in November and Nigeria just lately established tips for mobile-money banking licenses within the nation, after a prolonged Central Financial institution overview of finest digital finance practices.
Nigerian regulators demonstrated they’re no pushovers with overseas entities, after they slapped a $3.9 billion fine 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 brief positions in African e-commerce firm Jumia, after dropping a report accusing the corporate of securities fraud. Jumia’s share-price plummeted over 50% and has solely just lately begun to recuperate.
As of Wednesday, there have been indicators Opera could also be shaking off Hindenburg’s report — at the very least out there — as the corporate’s shares had rebounded to $7.35.