A class action lawsuit accuses Norway-based internet browser company Opera Limited of offering documents for its IPO that contained “materially false and misleading statements” about the company’s business and operational and compliance policies.
Opera completed its IPO in August 2018, issuing 9.6 million American Depository Shares (ADS) priced at $12 per share, raising approximately $115.2 million in gross proceeds. The complaint alleges, however, the IPO documents were “negligently prepared” and as a result contained “untrue statements of material fact.”
The company provides mobile and personal computer web browser applications, and in recent years has increased investments in fintech businesses. It also provides mobile loan and financing applications, which are offered on Google’s Play Store, as downloadable applications.
Specifically, the complaint accuses Opera of significantly overstating the sustainable growth and market opportunity for its browser applications. It also said the company failed to disclose that it controlled loan services applications and/or businesses that “relied on predatory lending practices.” The lawsuit says that this information, once revealed, was likely to have a material negative impact on Opera’s financial prospects.
The lawsuit, which was filed in the Southern District of New York, cited a Jan. 16 report from Hindenburg Research that said Opera’s browser business was in decline and that its cash flow is deteriorating. It also said that Opera’s short-term loan business appears to be in “open, flagrant violation” of the Google Play Store’s policies on short-term and misleading lending apps.
“Given that the vast majority of Opera’s loans are disbursed through Android apps, we think this entire line of business is at risk of disappearing or being severely curtailed when Google notices and ultimately takes corrective action,” said the report. It also said that “Opera has exhibited a troubling pattern of raising large amounts of cash … and then directing portions of it to entities owned or influenced by its chairman/CEO through a slew of questionable related-party transactions.”
Hindenburg gave Opera a 12-month price target of $2.60, which represented a “70% downside.” After the report was issued Opera’s stock price fell $1.69 per share, or 18.74%, to close at $7.33 per share on Jan. 16.
The following day Opera issued a statement that said it “believes that the report contains numerous errors, unsubstantiated statements, and misleading conclusions and interpretations regarding the business of and events relating to the company.”
Opera said it had recently launched and scaled multiple new businesses and has “continued to post strong financial results and intends to continue leveraging its well-known brand and large user base of more than 350 million users for additional growth.” It added that it “remains committed to maintaining high standards of corporate governance and constantly evolving our products, practices and governance.”