The investigation involved interviews with 37 former Equinix employees, industry experts, and competitors, as well as a review of financial and litigation records. Former employees reportedly provided examples of maintenance CapEx being classified as growth CapEx to boost reported AFFO metrics. The report also alleges that Equinix's questionable AFFO accounting has contributed to an estimated $295.8 million in stock award grants to top executives. Hindenburg Research has taken a short position in Equinix shares.
Key takeaways:
- Equinix, a global data center REIT, is accused of manipulating its accounting for AFFO, a key profitability metric for REITs, leading to an overstatement of at least 22% in 2023 alone.
- The company allegedly misclassifies 'maintenance CapEx' as 'growth CapEx', making the company appear more profitable than it actually is.
- Equinix's questionable AFFO accounting has contributed to an estimated $295.8 million in stock award grants to top executives who have personally benefited from these accounting games.
- Equinix is also accused of overselling power capacity in the hope that customers won’t use all the power they’ve contracted for, a risky approach that could lead to facility outages and a failure to fulfil contractual obligations.