Equity shorts have taken bigger positions in Diebold Nixdorf as the stock continues to nosedive in the face of a poor second quarter and the company's bonds go into a tail-spin on analyst speculation of a looming liquidity crisis.
The company is having a week to forget after reporting an unexpected second-quarter loss which sent its share price into free-fall and fully 73% down on the year-to-date.
Diebold's business has been hit by rising take-up of contactless payments and P2P payments apps, stripping back demand for ATMs.
According to data from IHS Markit, equity shorts have increased their position by 3.4m shares since 1 August, for a total of 29.3m shares or 31% of free float. In dollar terms the position has been taken down from a YTD high of $352m on 30 April to $150m at present, owing to the declining share price.
The company's bonds are also in the cross-hairs as it prepares to draw on its revolving credit line to return $160 million in cash to shareholders in Wincor Nixdorf as a condition of its take-over of the German ATM manufacturer.
Further bad news may be just around the corner with another $280 million of Wincor Nixdorf shares due for redemption, leading JPMorgan Chase analyst Paul Coster to talk of a potential "liquidity crisis" in a note published on Monday.
Notably, short demand for the 8.5% 2024 bond has also spiked following the earnings report, states IHS Markit, as the bonds have also been in a free-fall, hitting a new low of 67.13 cents on the dollar on 7 August, after having traded down from 92 cents on 31 July. The short position in the 2024’s is currently $114m at par, up from $68m prior to the earnings report.
If it can ride out the storm, the company may be able to look ahead to better days in 2020 as Microsoft withdraws support for the XP operating system, leading to a wave of fresh licensing deals and software upgrades.