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?
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.”
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.
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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.
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