Shares of Opera (NASDAQ:OPRA) sang a sad tune on Thursday, falling as much as 23.6% after a mixed earnings report. The Norway-based company behind the eponymous web browser software and online news services also merged its microfinancing services with fintech specialist Mobimagic, creating a new service named Nanobank.
Opera's sales dropped 10.2% year over year to $55.4 million. Adjusted earnings rose from $0.05 to $0.17 per American depositary share. Your average Wall Street analyst had been expecting earnings near $0.01 per ADS on revenue in the neighborhood of $61 million.
The Nanobank platform will serve roughly 50 million users at launch, combining the user bases of Opera's and Mobimagic's microlending services into a single unit. Opera owns 42% of this business while privately held Mobimagic controls the remaining 58%.
The soft top-line result in the second quarter certainly played a part in Opera's falling stock price today, but investors were also underwhelmed by the structure of the Nanobank deal. Microlending was Opera's fastest-growing business unit in this report: The volume of disbursed loans rose 82% from June to July. Giving another company majority ownership of this promising growth engine was not a popular decision. Mobimagic also happens to be owned and controlled by Opera Chairman and co-CEO Yahui Zhou. The whole self-dealing arrangement should raise a lot of eyebrows.
That being said, Opera reported strong growth in every business unit in the second quarter as measured by user counts and loan volumes. The monetization of these growing user groups is recovering slowly from a steep drop in the first quarter. A return to normal ad sales after the COVID-19 health crisis blows over should unlock plenty of shareholder value.