Shares of Mobile Mini (MINI) declined by 14.5% on Monday. The portable storage company is facing some serious challenges -- and investors are growing increasingly concerned.
The first risk factor that Mobile Mini lists in its 10-K annual report is as follows (emphasis added):
Our business is subject to the general health of the economy, including non-residential spending and energy prices[. A]ccordingly any slowdowns or decreases in the U.S. or international economy could materially affect our revenue and operating results.
Mobile Mini goes on to note that an economic slowdown could negatively affect its business in several ways, such as reducing demand for its portable storage solutions and limiting its ability to charge attractive rates for its products -- all of which would weigh heavily on its profits and cash flow.
Well, oil prices just fell by more than 20% after OPEC failed to strike a deal to cut production, resulting in mayhem in the energy industry. Worse still, the U.S. and international economy are likely to be severely weakened by the COVID-19 coronavirus outbreak. Two of the biggest risks to Mobile Mini's business -- a major economic slowdown and plunging energy prices -- are both occurring at the same time.
Mobile Mini is attempting to merge with fellow storage provider WillScot (WSC). The all-stock deal is expected to close in the third quarter, pending regulatory and shareholder approval. The added uncertainty of the merger is likely contributing to the volatility in Mobile Mini's share price -- WillScot's stock also declined sharply on Monday -- and could continue to do so until the deal is finalized later this year.