Equinix Faces Allegations of Accounting Manipulation and AI Infrastructure Concerns, Hindenburg Report Reveals

Equinix, a prominent data center owner, has come under scrutiny following allegations by short seller Hindenburg Research. According to an investigative report released by Hindenburg on Wednesday, Equinix stands accused of embellishing the advantages of artificial intelligence (AI) while purportedly engaging in significant accounting irregularities.

Hindenburg's report suggests that Equinix's transition to a real estate investment trust (REIT) in 2015 marked the beginning of what it calls "major accounting manipulation." The firm allegedly began using adjusted funds from operations (AFFO) as a pivotal metric for determining executive bonuses post-REIT status. Notably, Hindenburg claims that Equinix reported a substantial 47 percent decline in maintenance capital expenditures (CapEx) in 2015, resulting in an estimated 19 percent increase in reported AFFO. The report asserts that Equinix may have misclassified its CapEx figures to inflate its profitability, citing insights from numerous former employees who allege that these practices originated from senior management.

Former Equinix staff members provided detailed examples of what they described as manipulative accounting tactics within the company. One former director purportedly revealed that Equinix would assign new serial numbers to refurbished equipment, effectively categorizing it as new and recording it as growth CapEx. Another former operations director alleged that routine battery replacements were inaccurately classified as growth CapEx by framing them as "replacing a battery system."

In addition to the allegations of accounting irregularities, Hindenburg's report also raised concerns about Equinix's readiness to meet the escalating power demands associated with AI. Former employees expressed apprehensions about the company's ability to update its aging facilities to accommodate the anticipated surge in power requirements. Industry research cited in the report suggests that the growth of AI could potentially double the power demands of data centers within the next two years, posing a significant operational challenge for Equinix.

In response to the allegations, an Equinix spokesperson issued a statement: "We are aware of the report and in the process of reviewing claims made therein. We take these matters seriously, and we will not respond further to the claims during our review. We will report back once that review is complete, as appropriate." The statement reflects Equinix's commitment to thoroughly investigate the allegations before issuing any further statements.

The allegations made by Hindenburg Research have cast a shadow over Equinix's operations and financial reporting practices, prompting investors and industry observers to await the outcome of the company's internal review.

By fLEXI tEAM