OPay may be running at a 70% loss on investors funds
Opera Market shares have declined rapidly lately; The company’s share currently stands at 30% since its IPO
- Poor Owner-Investor communication as well as lack of transparency.
- Major stake in Loan Businesses which are mostly operated through apps offered on Google Play Store; as such, violates a lot of terms and conditions on the platform.
- Unfavorable Government decision- State Law/Uncertain market
Africa and Nigeria especially have been a “final destination’ for Opera’s investment lately, and there seems to be a lot of ‘untold’ truth about the Chinese company’s most recent activities.
According to a recent report by Hiddenburg- a research website, Opera was found guilty of several misconducts in its operations across the board. That is aside from other crises that could be of great disadvantage for the company in its new market- Nigeria.
The Opera-backed OPay has been subjected to a lot of checks lately after the report that– the platform could be possibly involved in what is known to be exploitative loans– broke out on the internet. According to the original reporter of the new findings, Hindenburg research, the following Opera lending apps- OPay’s Okash (Nigeria), OPesa (Kenya), and CashBean (India) has been guilty of offering predatory loans with deceptive or unclear terms.
While the report also revealed a record of illegal lending practices in the U.S. following the recent purchase of the company by Chinese-based investors, the same allegation could be the case with what is happening in the Africa region now as well. Opera’s lending apps which are been deployed via Google Play Store may have been violating a lot of policy on the platform including transparency.
The lending apps are reported to be deploying ”deceptive ‘bait and switch’ tactics to lure in borrowers and charging egregious interest rates ranging from ~365-876%.”
“Most of the Opera’s lending business is operated through apps offered on Google’s Play Store. In August, Google tightened rules to curtail predatory lending and, as a result, Opera’s apps are now in black and white violation of numerous Google rules.” the report read further.
Findings also revealed that the apps’ claim to offer a maximum annual percentage rate (APR) of 33% or less is not true as the actual percentage rate charged goes as high as 438% in the case of OPesa, while that of Okash and CashBean are also not excluded in the misleading.
While the interest rate is not the only misleading factor here, the company also spells out a repayment period between 60 to 90 days which– although is in line with Google’s 60-days minimum– is contrary to the actual duration which is no longer than 29-days (for OKash), and 15-days in some cases, although the time duration varies across the respective platforms.
According to a reliable source, the research into the current situation has been prompted by the recent dip in the company’s market share from 5% to 2%, as well as a massive default in its lending business amounting to about 50% in the non-refunded revenue.
In an attempt to protect its users from predatory loans, Google Back in August 2019, published a new set of rules to guide lending apps operation on the Play Store, however, a lot are still violating some of the most important rules by tweaking their product description to mislead the audience.
If at the end of the day, Opera is found guilty of the said offense, then just maybe the company may have to face numerous lawsuits from individuals who have been victimized, and most likely get kicked off the PlayStore platform except for otherwise reason- a possible readjustment in its terms and policy. If eventually the unexpected happens, Opera will also be at risk of forfeiting a greater share of the revenue generated from short-term loan business which currently accounts for more than 42% of the company’s revenue.
Meanwhile, Opera lending apps are not the only predatory ‘quick loan’ apps on Google Play Store, there are several other apps which are also guilty of the offense, which are also at risk of being axed assuming Google ends up taking follow-up action.
Another reason why Opera’s investment in Nigeria could be DOA is the unfavorable Government decision, as well as an uncertain market. Lagos State remains a top priority for many of the foreign investors including Opera, however, an uncertain market, as well as unfavorable State Government decisions, could pose very harmful to the numerous investment in Nigeria's most commercialized city.
Just in the latest development, the Lagos State Government has placed a ban on ‘Okada’ and ‘Napep’operation in the state, and that single decision also puts Bike-hailing services including the likes of Gokada, Max.ng, and ORide under an operational constraint, as their respective operations in the City has been suspended until further re-modification of the new law.
If at the end of the day—the ban on motorcycles comes to stay permanently in the state—then Startups like ORide may have to relocate their bikes/bikers to other states where the law is favorable. Either way, this would mean a lot of losses to both investors and the company as a whole—to think that new investors will be willing to put a dime in a striving business.
OPay’s alternative ride-hailing platform- OCar may also be at stake as the Lagos State Government has clampdown on its operation alongside others in the State. In the latest development, LASG has prohibited the operation of ride-hailing drivers from operating on Lagos roads without a hackney permit- a number plate that indicates that a car that is been driven is either commercial or private.
While some of these Government activities will not only slow down the activities of OPay in Nigeria, it will also have a negative cost implication on investors' funds over time. Currently, a reliable source which chose to be kept anonymous suggested that the company may be running at a 70% loss on investors’ fund. Apart from the challenges that the company has been facing in its major destination in Nigeria- Lagos State, it doesn’t appear that the company has bee doing a lot with its most recent funding up to the tune of $120 million, calling for more suspicion on what exactly the company has been doing with its funding.
It is also worthy of note that the Hiddenburg research pointed out a very notable and unlawful act by the new Chairman and CEO of Opera. Since the transfer of ownership to the Chinese Investors group—now headed by new CEO, Yahui Zhou; report claims that the leadership of Opera-- specifically the CEO-- has been indulging in unauthorized transfer of funds to personal businesses (Non-Listed companies) which the report suggested was fully (100%) owned by the Opera chairman.
This lack of transparency by the governing board of Opera also transcend to what is known to be a poor Owner-Investor communication. And as basic as it appears, it could negatively influence the trust of investors in the business moving forward. For instance, would you rather invest in a business that re-invests your investment in a supposed ‘side-gigs’? By the way, that is just one of the many allegations against Opera—hopefully, it doesn’t turn out to be the truth.
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