09:25 AM EDT, 06/04/2024 (MT Newswires) -- (Adds more details and recent stock movement.)

Axos Financial's ( AX ) "exposure to the riskiest asset classes, its lax underwriting standards, and glaring issues with its portfolio indicate that the company faces significant stress ahead," Hindenburg Research said in a note Tuesday.

As a result, Hindenburg has taken a short position in shares of Axos, according to the note.

While many financial institutions have backed away from the weakening commercial real estate market after the COVID-19 pandemic, Axos doubled down and increased its total exposure from $5.5 billion in March 2021 to $9.9 billion in the same month this year, Hindenburg said.

Meanwhile, Axos' customer base in commercial and multifamily banking is largely composed of non-performing or doubtful borrowers as a result of lax underwriting, Hindenburg said. "Axos has been extending loans or attempting to offer slight discounts to keep them afloat, but 'in a lot of cases the loans, the properties didn't cover'," the short seller said, citing a former Axos employee.

Axos did not immediately respond to MT Newswires' request for comment.

Shares of the company fell more than 15% in recent Tuesday premarket activity.

Price: 43.50, Change: -8.96, Percent Change: -17.08