Keith Dalrymple of DF Research has published a report alleging that Willscot Holdings Corp. WSC, a mobile office and site storage provider, is a “financial construct” with an “end-of-life fleet and a looming debt bomb” that could make its equity worthless.
Check out the WSC stock price over here.
What Happened: The report claims that the company's financial results are artificially inflated by underinvesting in its rental equipment, which is allegedly “old, decrepit, and otherwise unrentable.”
The research highlights a significant increase in the company's depreciation costs in its second-quarter 10-Q filing. Depreciation of rental equipment surged by 17% year-over-year to $88.4 million, despite a decline in leasing revenues and units on rent.
Willscot did not immediately respond to Benzinga’s request for comment.
Furthermore, the report casts doubt on the company’s ability to repay its substantial debt load. Willscot has a total of $3.6 billion in debt, with a $1.5 billion portion due in June 2027.
The report concludes that if these conditions persist, shareholders may be left with an “ancient, largely unrentable fleet, and $3.6B in debt,” in which case, the equity “could be worthless.”
Why It Matters: DF Research interprets the large depreciation change as an “accounting fire-drill” and the likely outcome of “negotiations with the auditor on how to write-down the value of the fleet—one painful impairment or slowly and quietly.”
Additionally, DF Research contends that the company “cannot repay the debt with its in-place inventory,” as it has few of the newer units customers want and a vast majority of older, less-demanded units.
The report also notes the departure of WSC's Chief Accounting Officer, coinciding with this change in accounting policy.
Price Action: WSC stock fell 1.30% on Friday. It was down 26.94% year-to-date and 28.63% lower over the past year.
Benzinga's Edge Stock Rankings indicate that WSC maintains a weaker price trend over the long, short, and medium terms. The stock also scores poorly on growth and quality rankings. Additional performance details are available here.
Price Action: The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, were higher in premarket on Monday. The SPY was up 0.21% at $638.50, while the QQQ advanced 0.18% to $575.59, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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