Africa’s largest start-up, Flutterwave, is battling allegations of financial impropriety and personnel harassment from Lagos to Nairobi, as it considers pushing ahead with plans to list the company.

The Nigerian fintech recently filled key positions including a chief financial officer as it prepares for an initial public offering potentially next year, people familiar with the matter said, requesting not to be identified because it’s private. It might, however, take longer as the company deals with a reputation crisis and amid a global market downturn, they said.

The business took a direct hit last month, when the Kenyan high court froze Flutterwave’s bank accounts under anti-money laundering rules and the central bank said it isn’t licensed to operate payments services in the country. The company has for months been struggling with allegations in the media and lawsuits, including claims of refusing former employees stock rights, harassment and bullying.

Flutterwave denied accusations of financial misconduct, including claims of money laundering in Kenya and irregularities related to stock options, and said it has taken action against those found culpable for any form of harassment in the company. It said the IPO plan is subject to market conditions.

It’s a blow for Flutterwave and its co-founder and CEO, Olugbenga Agboola, who tripled the company’s valuation to US$3-billion (R49-billion) within a year after attracting investments from venture capital firms including B Capital Group and Tiger Global Management. His stake in Flutterwave is worth more than $370-million as of the company’s January funding round, according to an analysis by the Bloomberg Billionaires Index using Pitchbook data.

“The Flutterwave story was one of an African fintech and it being the leader for Africa as the next frontier for fintech and venture investors. Then the unravelling of that story started and it hasn’t stopped yet,” said Raj Kulasingam, a corporate lawyer, who with investment banker Vishal Agarwal, have made fivefold returns funding African start-ups since 2017. “With all of this, I don’t believe that the international public markets are ready for a Flutterwave IPO.”

Culture of harassment

At least three former Flutterwave employees interviewed for this article said a culture of harassment and bullying from executives had developed under Agboola. The people asked not to be identified for fear of reprisals.

On the stock-award matter, a former employee, Gbemisola Ajayi, is suing Flutterwave. Ajayi is seeking $800 000 or the value of shares she said she was unfairly denied, according to court papers filed in Nigeria’s national industrial court.

Ajayi said she decided to leave the company in March 2020 after the working environment “became toxic” and weighed on her mental health, according to the filings. The firm refused to award stock options she’d been promised out of “malice”, she said in the filings.

Ajayi declined to comment beyond what was in the court fillings when contacted.

Flutterwave said conditions for the stock options award weren’t met before Ajayi resigned. The criteria included an audit and update on the company’s valuation, a vesting period and above-par performance, the company said in responding court papers. The case is next due in court in October.

In a response to questions, Flutterwave said that the company “followed all legal processes and procedures to allow third parties, including former employees, to sell their shares to other third parties”.

The Lagos and San Francisco-based company was founded six years ago and facilitates cross-border transactions in multiple currencies for companies, including Alibaba’s Alipay and Uber Technologies, in primarily emerging and frontier markets.

For a highly-valued start-up, taking weeks to respond to the allegations “was incredibly damaging to the overall ecosystem and this latest news drama has again hurt”, said Eghosa Omoigui, founder and managing general partner of early-stage funder EchoVC Partners.

In the financial impropriety case, Kenya’s Assets Recovery Agency accused Flutterwave of money laundering and obtained court orders to block access to more than $44-million in the company’s bank accounts, according to court documents. Flutterwave said the allegations are untrue, has records to verify that and is “working to ascertain the motive behind the false claims”.

Central Bank of Kenya governor Patrick Njoroge said on 28 July that Flutterwave isn’t licensed to operate as a payment service provider in the country.

Going to public markets is as much a public relations and marketing exercise as it is a fund raising. And at the moment Flutterwave’s brand equity is damaged

Flutterwave, which registered its business in Kenya in 2017, said it has been operating through partnerships with banks and mobile network firms. “We have been in constant engagement with the Central Bank of Kenya to ensure that we provide all the requirements, and we look forward to receiving our licence,” it said. “We are committed to operating within the stipulated laws, regulations and industry standards in Kenya.”

Agboola, 37, is seeking investors for Flutterwave’s IPO planned in the US and possibly Nigeria. Talks are still at an early stage and the company hasn’t yet mandated financial advisers, according to the people familiar with the matter who asked not to be identified discussing a private issue.

The company hired Oneal Bhambani from American Express in June to be chief financial officer, and named Gurbhej Dhillon, formerly head of Goldman Sachs Group’s lending platform, Marcus, as its chief technology officer.

“Given Flutterwave’s market position and strong balance sheet, the company has a significant growth opportunity over the next few years,” Bhambani said in an e-mailed response to questions on a possible listing. “Operationally, we are putting in place all aspects of controls, processes and infrastructure to prepare for an IPO subject to market conditions,” he said.

The firm bolstered its global finance team to include Rebecca Mendel, Danny Eidson and Oscar Lan, from American Express and its Kabbage platform, said Bhambani.

Sceptical

Bankers are sceptical about the timing, people familiar with the listing plans said. Flutterwave would benefit from holding off until at least next year to give the company time to address the various allegations, the people said, asking not to be identified discussing a private matter. Shareholders are also concerned about the general global market downturn, with technology firm-valuations among the worst hit, they said.

“Going to public markets is as much a public relations and marketing exercise as it is a fund raising. And at the moment Flutterwave’s brand equity is damaged,” said Agrawal. “They need to fix the problems.”

More than a dozen of Flutterwave’s current investors, including Tiger Global and Whale Rock Capital, were approached for this article, but none responded.

“It is pertinent that foreign investors work very closely with trusted local investors to carry out the necessary due diligence and ongoing assessment of the health of their portfolio companies beyond growth metrics,” said Surabhi Nimkar, partner at GreenHouse Capital which exited Flutterwave about two years ago. “Founders must carry their stakeholders along with transparency.” — Loni Prinsloo and Samuel Gebre, (c) 2022 Bloomberg LP