The Tyro Payments Ltd (ASX: TYR) share price has returned from its trading halt on Tuesday after responding to a short seller report.
At the time of writing, the payments company’s shares are rocketing 17% higher to $2.72.
What did the short seller claim?
Late last week Viceroy Research alleged that the Tyro payment terminal outage was far greater than it admitted and labelled the company “the most unreliable & technologically inferior fintech in Australia.”
Viceroy claimed that its research suggests that Tyro rendered useless around half of its terminals across the country via a software update. This “left businesses, including medical facilities, without any means to collect payment from customers.”
What was Tyro’s response?
This morning Tyro revealed that it has reviewed and rejected Viceroy Research’s report. It notes that the report follows a “familiar playbook used by overseas domiciled and unregistered operators seeking to generate uncertainty, so as to directly profit from or facilitate others to profit from their research.”
While the company has intentionally not commented on each individual opinion of the authors of the report, it has responded to a number of key factual misstatements, noting that these falsehoods are the foundation for many of the opinions expressed within the report.
The first falsehood the company tackled was the number of terminals that are offline.
“At no time have 50% of Tyro’s terminals been offline. As advised to the ASX today 15% of Tyro’s merchants remain impacted.”
Tyro also stressed that the cause of the outage was not a software patch.
“The root cause of the connectivity event has been identified as arising from an issue residing in specific versions of the terminal platform software supplied by the manufacturer of the terminals, Worldline. This issue caused valid, forward dated, certificates on the impacted terminals to be incorrectly interpreted as expired, due to the interplay of the selected expiry date and any date on or after 5 January 2021.”
Viceroy claimed that fixing the terminals would be capital intensive and cost up to $12 million to replace. Tyro has refuted this claim.
“The repair involves collecting the impacted terminals from the field and implementing an immediate software update. If the terminals were not in a disconnected state this fix would have been achieved via a remote download. There is no capital-intensive terminal repair or replacement required of the nature suggested in the Report.”
Another claim that has been refuted is the age of Tyro’s terminal fleet, which Viceroy said was over a decade old.
“Tyro terminals are exclusively Worldline manufactured and the fleet is not aged as implied in the Report, specifically: – ~60% of the fleet is 3 years old or less; – ~80% of the fleet is 5 years old or less.”
Finally, the short seller claimed that Tyro floats its operating cash flows through customer deposits. Tyro confirmed that its cash flows are audited and in compliance with Australian Accounting Standards and International Financial Reporting Standards.
“Tyro has cash and investments excluding depositor funds of $137 million as at 31 December 2020. Tyro is an Authorised Deposit-taking Institution (ADI). Deposits are generated to fund merchant loans and not to support operating cash requirements. The reporting of customer deposits in our audited Statement of Financial Position and Statement of Cash Flows is in compliance with Australian Accounting Standards and International Financial Reporting Standards.”
“The adjustments in the Report to Tyro’s cash flows include non-cash items (ie share based compensation) and furthermore to extract ‘movements in deposits’ without adding back ‘movements in loans’ is an inconsistent treatment for an ADI and will lead to an incorrect assessment of cash movements as it excludes the banking business.”
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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 has no position in any of the stocks mentioned. 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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