Bola Oduntan

The latest report of insider trading and other allegations of operational scandals at Flutterwave echoes similar unethical deals that haunted Jumia shortly after its listing at the New York Stock Exchange in 2019.

Flutterwave, founded in 2016 by Nigerians was registered in the United States (headquartered in San Francisco). Going by its roaring success a few years after it opened shop, raising $170 million from a group of international investors to expand its customer base, which pushed its valuation up to more than $1 billion, it has been fittingly described as Africa’s unicorn.

Buoyed by this success, the owners of Flutterwave told Reuters that they were considering listing on the international stock exchange.

“We may consider the possibility of listing in New York or a possible dual listing in New York and Nigeria,” Flutterwave’s CEO and co-founder Olugbenga Agboola told Reuters in a telephone interview after the payment and money transfer company made a huge haul of cash from investors.

For a company founded by Nigerians and already smelling like rose flower in a highly competitive global fintech market, Flutterwave fits the bill as the pride of Africa. Payment systems as key drivers of e-commerce and sundry online transactions are increasing in value in Africa. Two factors enabled this growth: Covid-19 pandemic which drove many to online transactions and increasing mobile penetration. More and more Africans now have access to mobile phones and other internet enabled digital gadgets.

Africa, globally perceived as the next frontier in digital market, is projected to witness exponential growth ahead of other continents. This is what makes analysts conjecture that the fundraise which brings the total investment in Flutterwave to $225 million is only just the beginning of a roller-coaster voyage by Africa into the global mix.

The fundraising round led by Avenir Growth Capital and Tiger Global Management LLC has put Flutterwave at the forefront of innovation in payments technology, says Jamie Reynolds, a partner at Avenir Growth Capital.

Other investors listed as participants in the funding round included venture capital firms, Early Capital Berrywood, Green Visor Capital and Greycroft Capital, as well as U.S. payments company Paypal .

Reuters reports that the completion of the fundraising round, a little more than a year after Flutterwave announced a partnership with Visa and Worldpay, highlights the growing interest in the burgeoning payments market in Africa.

Nigeria is a big beneficiary as global investors look to Africa. Recall that in October, 2021, U.S. payments company Stripe bought Nigerian fintech business Paystack for $200 million and in late 2019 Visa bought a 20% stake in Nigerian payments company Interswitch, the main platform for the country’s business-to-business transactions. For every African especially Nigerian, there is a sense of pride when an African company goes global.

The Flutterwave incident seemed to have opened a window for tech startup owners in Nigeria to vent their feelings. Jason Njoku, the CEO of Iroko TV twitted: “Telling these stories are actually important in how we grow our ecosystem into self-sustainability. In the long term that’s all that matters. What we have now is hyperbole to an extreme. Been saying it for years.

Hot emerging market money poured into Nigeria with zero checks and balances… what Flutterwave did (if proven) was wrong. Will Flutterwave die? Of course not, but penance will need to be paid. Again, that’s a good thing. Flutterwave will be stronger.”

He urged caution on the part of Nigerian startups. 

Unfortunately, it’s at the point of going global that African companies are exposed as crooked, unethical and not playing by the rules. Today, it’s Flutterwave being accused of flouting basic rules that govern business-to-consumer (as well as business-to-business) transactions and relevant Nigerian authorities are stonewalling to take action. This was exactly what happened in the case of Jumia, the pan-African e-commerce company though registered in Germany but operates in Africa with Nigeria as its biggest market.

Jumia was accused of many infractions including that:

(i) Jumia had materially overstated its active customers and active merchants;

(ii) Its representations about its orders, order cancellations, undelivered orders and returned orders lacked a sufficient factual basis and materially overstated the company’s sales;

(iii) Jumia failed to sufficiently disclose related party transactions; and

(iv) Jumia’s financial statements were presented in violation of applicable accounting standards.

On or about April 12, 2019, Jumia sold 13.5 million shares of stock in its initial public offering (the “IPO”), at $14.50 per share raising $196 million in new capital at the New York Stock Exchange to the delight of many Africans. But that gesture turned ugly as it exposed Jumia as an e-commerce company with little regard for corporate governance.

Trouble started when on May 9, 2019, Citron Research, a respected firm with a history of in-depth research in stock markets and investments, published a report accusing Jumia of overstating certain financial metrics in its April 2019 IPO prospectus and omitting adverse information about the number of returned, undelivered, or canceled orders from the prospectus.

On the strength of this information, Jumia’s share price fell by $6.22 per share, approximately 18.8%. The investing public, mostly Americans, felt conned by an African ‘smart’ company.

The ensuing market rage prompted Kirby McInerney LLP to put out a notice to concerned shareholders to fill out a contact form which it aggregated to push for the rights or interests of the shareholders at no cost to the investors. At the end, Jumia opted for out-of-court settlement in the ensuing class action but not without coughing out a princely $5 million in settlement.

US market analysts said that the case of Jumia dented the image of Africa, insisting that it cast a huge shadow on the chances of tech startups from Africa to be trusted on their face value by international investors. To them, the action of Jumia deserved to be probed and the company sanctioned by relevant authorities in Africa, particularly Nigeria where it has its highest market.

Many tech startups are sprouting out of Africa namely – PiggyVest, Andela, Opay (Nigeria); Sokowatch, Lendable, M-Kopa (Kenya) and Jumo, Aerobotics, MFS Africa (South Africa). They are part of the over 4,000 tech startups in the three most advanced ICT-savvy countries on the continent. While many of them desire to go international, get listed at major international stock markets, they are bogged down and haunted by the nasty image Jumia presented to US investors for which they demand punishment by African securities and exchange commissions. Analysts believe that the inability of respective African securities authorities to exert punishment on Jumia may open the door of impunity for other African tech startups to cook the books just to look good only to end up desecrating the image of Africa in the global bourse.

• Oduntan, Africa ICT Market Analyst, Writes from Lagos