Shares of Axos Financial (NYSE:AX) tumbled more than 13% Tuesday after Hindenburg Research said it has taken a short position in the stock, claiming there are "glaring" problems at the company.
The short seller said Axos trades at a 35% P/TBV premium compared to similarly sized community and regional banks, "pricing in investor expectations of outsized growth, a low-risk loan book, and multiple years of runway ahead."
They argue that its valuation premium implies that "despite operating in an environment that has devastated many peers, Axos has navigated it."
"Our research, including industry analysis, interviews with 21 former employees, lease agents and industry experts, combined with an examination of Axos' loan book derived through local property records, indicates a company exposed to the riskiest asset classes with lax underwriting standards and a loan book filled with multiple glaring problems," claims Hindenburg.
Overall, the investment research firm claims "Axos' exposure to the riskiest asset classes, its lax underwriting standards, and glaring issues with its portfolio" indicates that it faces significant stress ahead.