Shares of ATM maker Diebold Nixdorf (DBD) are plunging again on Thursday, adding to recent losses. The stock is down 11% today and has lost nearly 73% over the past year, with most of the loss coming in the past two weeks.
The initial downward catalyst was Diebold's dismal second-quarter earnings report, which caused a massive 36% one-day plunge in the stock. Without getting too deep into the numbers, Diebold surprised investors with a quarterly loss and cut its full-year guidance. CEO Gerrard Schmid blamed higher-than-expected costs for the poor quarterly results.
Worst yet, Diebold indicated that it could be having trouble with its debt load, saying that it was talking to its lenders about a modification to its credit agreement.
In the wake of the troubling news, especially in regards to Diebold's debt, the company's bonds have been trading for steep discounts. This isn't surprising as investors are expected to be cautious about any company's debt instruments when there are serious concerns about the ability to service the debt payments.
In the week or so since the company's earnings report, short-sellers have also been aggressively betting against the company's shares. Since Aug. 1, an additional 3.4 million shares of Diebold have been shorted according to IHS Markit data, bringing the total short interest to 31% of the company's shares. This downward pressure is likely the cause of the steady decline over the past few days.
Diebold's business model seems to be under attack from disruptive technologies. Fewer people are using cash to pay for goods and services these days as card payments are becoming almost universally accepted, even among small merchants. In addition, the rise of peer-to-peer payment apps has greatly reduced the need to access cash, even to pay personal debts to other people. In short, demand for ATMs, the bread-and-butter of Diebold's business, has been falling and there's no reason to think this trend will reverse course.
If the company can successfully restructure its financial obligations, it would certainly help investors breathe a sigh of relief. However, the long-term question is: What will Diebold's growth driver be if ATM demand continues to fall?