Tyro shares plunge after short-seller attack

Short-seller Viceroy calls payments terminal firm Tyro ‘unreliable’ and ‘inferior’ after an outage affecting thousands of businesses.

Tyro – led by CEO Robbie Cooke – is under attack by a short seller activist group. Photo AAP/ Ric Frearson

Viceroy Research and payments terminal firm Tyro are embroiled in a war of words, after the short-seller group attacked Tyro and labelled it the “most unreliable and technologically inferior fintech” in Australia.

A detailed report, released by Viceroy on Friday, sent Tyro’s shares plummeting as much as 12 per cent to $2.31. The company — which has been rocked this year by a terminal outage — then placed its stock in a trading halt until Tuesday, or the announcement of a further update on its recovery plans.

Tyro’s ASX statement said it wanted to provide another update and combat “false assertions” by a third party report, without naming Viceroy. Investors are expecting Tyro will provide a detailed response to the scathing report on Monday.

Tyro has had a shocking start to 2021 as a software issue in its Eftpos terminals caused havoc for thousands of businesses since January 5.

Viceroy declared in its report that it was short Tyro and questioned the company’s disaster planning, given a large proportion of its customers had been hit by software glitches in its payment terminals.

“Over the last week, our research suggests Tyro has ‘bricked’ (verb: to turn into a brick) circa 50 per cent of its terminals across the country via a software patch, which requires a recall and capital-intensive terminal repair/replacement,” the report said.

“It has no disaster recovery plan and has left businesses, including medical facilities, without any means to collect payment from customers.”

Those comments in the report threw into question an update by Tyro on January 13, which said 70 per cent of its merchant customers were unaffected by the software issue. It said 11 per cent had multiple terminals with at least one functioning, while 19 per cent were completely offline.

Tyro on Friday stood by its January 13 update, saying the investor information provided around the proportion of merchants and transactions impacted, remained correct.

Viceroy – which in the past has taken aim at companies including WiseTech, Quintis, Syrah Resources and Steinhoff International – is an activist investor. In shorting Tyro, Viceroy is betting the stock they sell will drop in price.

This week it also became public that Tyro faced a potential class action over its Eftpos terminal outage, which forced thousands of small businesses to accept cash-only transactions.

Law firm Bannister Law on Wednesday said it was investigating potential claims from businesses that had been unable to accept Eftpos payments since the outage began.

The law firm is also considering any potential shareholder claims against Tyro following its share price collapse fall since it revealed a proportion of its terminals had become “bricked” from a “configuration issue”. The shares have tumbled 29 per cent through this week.

Tyro has already had to revise up estimates for the software problem in its terminals. This week, it revealed 30 per cent of its more than 32,000 merchants had been affected by the outage, while an earlier update said around 15 per cent of its merchants were impacted.

Viceroy came out swinging with its criticism of Tyro after gauging feedback from a number of sources including online forums and directly from several hundred merchant customers.

Viceroy said by drawing on research and interviews with affected merchants, it did not see any compelling bull thesis for Tyro.

“It seems that Tyro has no idea – and no way to determine – how many of its terminals are actually functional,” the report added. “Viceroy’s channel checks confirmed that many customers had bricked terminals and had received no communications from Tyro unless prompted.

“Viceroy calls to Westfield shopping centres indicate that Westfield gift cards are all completely unreadable.”

Tyro is the fifth-largest domestic provider of Eftpos terminals, sitting just behind the big four banks, and has the backing of billionaire Mike Cannon-Brookes. Mr Cannon-Brookes was on Tyro’s board for nine years until early 2019.

Of six analysts that cover the stock, three have a “hold” rating on Tyro, two have a “buy” and one analyst rates it a “sell”, according to Bloomberg.

Viceroy was critical of Tyro’s technology and said its disgruntled customers were already seeking out alternative providers given the outage.

“Tyro more closely resembles a bank than a fintech. There is nothing technologically special about Tyro … Its largest revenue driver is the provision of merchant terminals, which have remained largely unchanged for over a decade.”

The report also questioned whether Tyro could properly execute its recovery plan, and said the terminal outage appeared to be a Tyro issue given other Worldline machines were still operational.

Before Tyro was hit with the terminal outage the company had seen growth through 2020. Spending across its terminals jumped more than 20 per cent over the year compared to 2019 as Australians spent up and shied away from using cash through the pandemic.