Equinix, an $80 billion data center provider, found itself under scrutiny as Hindenburg Research leveled accusations against its management, alleging the sale of an “AI pipe dream” to shareholders while manipulating crucial metrics to inflate profitability.
Hindenburg, having taken a short position against Equinix, expressed its belief that shares of the real estate investment trust (REIT) would decline.
Equinix’s shares experienced a sharp drop of up to 7% in premarket trading, though losses moderated to around 3% by Wednesday’s opening.
Equinix boasts a clientele that includes the cloud divisions of tech giants such as Amazon, Google, and Microsoft, as stated on its website.
“We are investigating the claims and we will respond in due course,” stated an Equinix spokesperson.
According to the short seller, Equinix categorized maintenance expenses—a significant cost center for REITs—as growth expenditures, creating the impression “that the company’s cost to maintain its revenue base is lower than it actually is.”
Allegedly, former Equinix employees and executives informed Hindenburg that the pressure to misclassify capital expenditures (capex) as growth rather than maintenance originated “from top management.”
Hindenburg asserted that this “questionable” accounting practice enabled Equinix to enhance its adjusted funds from operations, a metric also utilized by the company for executive stock grants.
Founded in 1998 and transitioning into a REIT in 2015, Equinix boasted a workforce of over 13,000 employees as of December 2023, as per a regulatory filing.
In recent earnings reports, the company emphasized its “crucial” role “in an AI-driven world.”
Hindenburg has adopted short positions against other prominent entities, including Nikola, Icahn Enterprises, and Gautam Adani’s conglomerate.
