Tyro Payments (ASX:TYR) share price crashes 12% on short seller attack

The Tyro Payments Ltd (ASX:TYR) share price is crashing lower again on Friday after being attacked by a short seller…

| More on:

Image source: Getty Images

The Tyro Payments Ltd (ASX: TYR) share price came under pressure again on Friday and sank notably lower before going into a trading halt.

The payment processor’s shares were down 12% to $2.32 before the halt.

This latest decline means the Tyro share price is down by almost a third since the start of 2021.

Why is the Tyro share price sinking lower?

Investors have been selling Tyro shares this month after it reported an outage with its payment terminals on 7 January.

Unfortunately, despite the apparent modernity of its technology, this outage has proven to be a much harder fix than first hoped. The company advised that the issue caused a subset of terminals to lose connectivity with Tyro’s network, meaning they could neither transact nor be updated remotely.

In light of this, Tyro has been collecting, repairing, and returning impacted terminals to merchants as rapidly as possible.

That’s old news, why the selloff today?

Today’s selling has been caused by a short seller report by Viceroy Research. It has previously targeted the likes of WiseTech Global Ltd (ASX: WTC) and Syrah Resources Ltd (ASX: SYR).

Viceroy’s note, entitled “Tyro by name, Tyro by nature,” claims that the problem is far greater than the company is admitting and labeled it “the most unreliable & technologically inferior fintech in Australia.”

Here’s why:

Over the last week, our research suggests Tyro has “bricked” (verb: to turn into a brick)  ~50% of its terminals across the country via a software patch, which requires a recall and capital-intensive terminal repair/replacement. It has no disaster recovery plan and has left businesses, including medical facilities, without any means to collect payment from customers.

Viceroy Research believes Tyro presents a limited-risk short as customers churn in record numbers to vastly superior, non-archaic payment solutions providers, which are available in abundance, and immediately. Tyro presents no real catalyst to make a jump into profitability.

Despite being in operation since 2003 Tyro is increasingly loss making and floats its operating cash flows through customer deposits in its banking division.

We believe Tyro presents significant downside.

Tyro has requested a trading halt while it prepares a response to the allegations. 

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia owns shares of WiseTech Global. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers