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Opera and the firm short-selling its stock (alleging Africa fintech abuses) weigh in

Internet services company Opera has come under a short-sell assault based on allegations of predatory lending practices by its fintech products in Africa.

Hindenburg Research issued a report claiming (among other things) that Opera’s finance products in Nigeria and Kenya have run afoul of prudent consumer practices and Google Play Store rules for lending apps.

Hindenburg — which is based in NYC and managed by financial analyst Nate Anderson — went on to suggest Opera’s U.S. listed stock was grossly overvalued.

That’s a primer on the key info, though there are several additional shades 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, largely centered around its Opera browser.

Opera was acquired in 2016 for $600 million by a consortium of Chinese investors, led by current Opera CEO Yahui Zhou.

Two years later, Opera went public in an IPO on NASDAQ, where its shares currently trade.

Web Broswers Africa 2019 Opera

Though Opera’s web platform isn’t widely used in the U.S. — where it has less than 1% of the browser market — it has been number-one in Africa, and more recently a distant second to Chrome, according to StatCounter.

On the back of its browser popularity, Opera went on an African venture-spree in 2019, introducing 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 delivery app OFood.

Central to these services are Opera’s fintech apps: OPay in Nigeria and OKash and Opesa in Kenya — which offer payment and lending 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 led a wave of Chinese VC in African fintech, including $170 million in two rounds to its OPay payments service in Nigeria.

Opera’s fintech products 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 pivoted to products generating 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 products 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 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 suggested Opera’s stock should trade at around $2.50, around a 70% discount to Opera’s $9 share-price before the report was released on January 16.

Hindenburg also disclosed the firm would short Opera.

Founder Nate Anderson confirmed to TechCrunch Hindenburg continues to hold short positions in Opera’s stock — which means the firm could benefit financially from declines in Opera’s share value. The company’s stock dropped some 18% the day the report was published.

On motivations for the brief, “Technology has catalyzed numerous 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 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 also took aim at Google.

“Google has become the primary facilitator of these predatory lending apps by virtue of Android’s dominance in these markets. Ultimately, our hope is that Google steps up and addresses the bigger issue here,” he said.

TechCrunch has an open inquiry into Google on the matter. In the meantime, Opera’s apps in Nigeria and Kenya are still available on GooglePlay, according to Opera and a cursory browse 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 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 proper banking licenses in Kenyan or Nigeria. “We believe we are in compliance with all local regulations,” said a spokesperson.

TechCrunch asked Hindenburg’s Nate Anderson if the firm had contacted local regulators related to its allegations. “We reached out to the Kenyan DCI three times before publication 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.

The first is how it may impact Opera’s business moves in Africa. The company is engaged in competition with other startups across payments, ride-hail, and several other verticals in Nigeria and Kenya. Being accused of predatory lending, depending on where things go (or don’t) with the Hindenburg allegations, could put a dent in brand-equity.

There’s also the open question of if/how Google and regulators in Kenya and Nigeria could respond. Contrary to some perceptions, 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 licenses in the country, after a lengthy Central Bank review of best digital finance practices.

Nigerian regulators demonstrated they are no pushovers with foreign entities, when 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 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 head and activist short-seller Andrew Left — notable for shorting Lyft and Tesla — took short positions in African e-commerce company Jumia, after dropping a report accusing the company of securities fraud. Jumia’s share-price plummeted over 50% and has only recently begun to recover.

As of Wednesday, there were signs Opera may be shaking off Hindenburg’s report — at least in the market — as the company’s shares had rebounded to $7.35.

Chinese apps are losing their hold on India to local developers

Apps from Chinese developers have been gaining popularity on Indian app stores for sometime. Last year, as many as 44 of the top 100 Android apps in India were developed by Chinese firms.

But things have changed this year as local developers put on a fight. According to app analytics and marketing firm AppsFlyer, Indian apps as a whole have recaptured their original standing.

41% of top 200 apps in Indian editions of Google’s Play Store and Apple’s App Store in Q2 and Q3 this year were developed by Indian developers and local firms, up from 38% last year, the report said. Data from App Annie, another research firm, corroborates the claim.

“This uptick happened chiefly at the expense of Chinese apps, which fell from their lead position to 38% from 43% in 2018. Altogether, Chinese and Indian apps make up almost four-fifths (79%) of the list,” the report said.

The shift comes as scores of Indian firms have launched payments, gaming, news, and entertainment apps in the last year and a half, said AppsFlyer, which analyzed 6.5 billion installs in the second and third quarters of this year.

But Chinese developers are not giving up and continue to maintain an “impressive” fight in each category, the report said.

India — which is home to more than 450 million smartphone users and maintains relatively lax laws to support an open market — has naturally emerged as an attractive battleground for developers worldwide.

Many Chinese firms including Xiaomi and ByteDance count India as one of their largest markets. TikTok app has amassed over 200 million users in India, for instance. Xiaomi, which leads the Indian smartphone market, is quickly building a portfolio of services for users in India. It launched a lending app in the country earlier this month.

Gaining traction among first time internet users, most of whom have lower financial capacity, can prove challenging. Those developing travel apps had to spend about 170 Indian rupees ($2.4) for each install, for instance. Food and drink app makers spent 138 Indian rupees ($1.9) per install during the aforementioned period, while games cost 13.5 Indian rupees.

Data from @AppsFlyer state of App Marketing 2019 India – key highights:
– Indian Apps claimed more installs in 2019 vs chinese Apps
– Apps in finance category spent the most in non-organic install (easy to guess which ones)
– As a result, finance Apps saw 59% uninstall on Day 1 pic.twitter.com/ROADpk9VQK

— Deepak Abbot (@deepakabbot) December 23, 2019

Despite the marketing spends, retention rate for these apps was 23.4% on day 1, a figure that plummeted to 2.6% by the end of the month. (This is still an improvement over retention rates of 22.8% on day 1, and 2.3% on day 30 last year.)

Indonesia unblocks Tumblr following its ban on adult content

Indonesia, the world’s fourth largest country by population, has unblocked Tumblr nine months after it blocked the social networking site over pornographic content.

Tumblr — which, disclaimer, is owned by Oath Verizon Media Group just like TechCrunch — announced earlier this month that it would remove all “adult content” from its platform. That decision, which angered many in the adult entertainment industry who valued the platform as an increasingly rare outlet that supported erotica, was a response to Apple removing Tumblr’s app from the iOS Store after child pornography was found within the service.

This impact of this new policy has made its way to Indonesia where KrAsia reports that the service was unblocked earlier this week. The service had been blocked in March after falling foul of the country’s anti-pornography laws.

“Tumblr sent an official statement regarding the commitment to clean the platform from pornographic content,” Ferdinandus Setu, Acting Head of the Ministry of Communication and Informatics Bureau, is reported to have said in a press statement.

Messaging apps WhatsApp and Line are among the other services that have been forced to comply with the government’s ban on ‘unsuitable’ content in order to keep their services open in the country. Telegram, meanwhile, removed suspected terrorist content last year after its service was partially blocked.

While perhaps not widely acknowledged in the West, Indonesia is a huge market with a population of over 260 million people. The world’s largest Muslim country, it is the largest economy in Southeast Asia and its growth is tipped to help tripled the region’s digital economy to $240 billion by 2025.

In other words, Indonesia is a huge market for internet companies.

The country’s anti-porn laws have been used to block as many as 800,000 websites as of 2017so potentially over a million by now — but they have also been used to take aim at gay dating apps, some of which have been removed from the Google Play Store. As Vice notes, “while homosexuality is not illegal in Indonesia, it’s no secret that the country has become a hostile place for the LGBTQ community.”

Google brings its ARCore technology to China in partnership with Xiaomi

Google is ramping up its efforts to return to China. Earlier this year, the search giant detailed plans to bring its ARCore technology — which enables augmented reality and virtual reality — to phones in China and this week that effort went live with its first partner, Xiaomi.

Initially the technology will be available for Xiaomi’s Mix 2S devices via an app in the Xiaomi App Store, but Google has plans to add more partners in Mainland China over time. Huawei and Samsung are two confirmed names that have signed up to distribute ARCore apps on Chinese soil, Google said previously.

Starting today, #ARCore apps are available on Mix 2S devices from the Xiaomi App Store in China. More partners coming soon → https://t.co/16QoOTgqve pic.twitter.com/lT4TYXrzwF

— Google AR & VR (@GoogleARVR) May 28, 2018

Google’s core services remain blocked in China but ARCore apps are able to work there because the technology itself works on device without the cloud, which means that once apps are downloaded to a phone there’s nothing that China’s internet censors can do to disrupt them.

Rather than software, the main challenge is distribution. The Google Play Store is restricted in China, and in its place China has a fragmented landscape that consists of more than a dozen major third-party Android app stores. That explains why Google has struck deals with the likes of Xiaomi and Huawei, which operate their own app stores which — pre-loaded on their devices — can help Google reach consumers.

ARCore in action

The ARCore strategy for China, while subtle, is part of a sustained push to grow Google’s presence in China. While that hasn’t meant reviving the Google Play Store — despite plenty of speculation in the media — Google has ramped up in other areas.

In recent months, the company has struck a partnership with Tencent, agreed to invest in a number of China-based startups — including biotech-focused XtalPi and live-streaming service Chushou — and announced an AI lab in Beijing. Added to that, Google gained a large tech presence in Taiwan via the completion of its acquisition of a chunk of HTC, and it opened a presence in Shenzhen, the Chinese city known as ‘the Silicon Valley of hardware.’

Finally, it is also hosting its first ‘Demo Day’ program for startups in Asia with an event planned for Shanghai, China, this coming September. Applications to take part in the initiative opened last week.

Google just made a very subtle change to its Play Store logo and icons

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Google’s Play Store is getting a brand new look … well, kind of.

In a continuing effort refine the Play brand, Google has quietly rolled out a new logo for the Play Store, Android Police noticed. The new logo drops the shopping bag, just leaving the colorful triangle as the new app icon.

New Logo

New Logo

Image: google

Old Logo

Old Logo

Image: google

While the new icon first appeared on Google’s new Pixel phone, the bagless design is now rolling out to other devices too.

Sure, it’s a very subtle change, but the redesign comes with a big branding message. As Google continues to tweak logo designs, it’s creating a cohesive visual identity tied to the clean, material design aesthetic that the company announced a few years ago.  Read more…

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