US hedge fund Hindenburg Research targeted data centre owner Equinix, which named Google Ireland boss Adaire Fox-Martin as chief executive last week, alleging that the company manipulates its accounting and is selling an “AI pipe dream.”
Shares of Equinix dropped 3.5 per cent to $814.95 (€751.13) at 9:55am in New York after Hindenburg released a report announcing a short position in the property owner. The stock had climbed roughly 4.9 per cent this year through Tuesday’s close.
Hindenburg, which has previously published heavily critical reports on several companies including financial software firm Temenos and Indian conglomerate Adani Group, alleges that the nearly $80 billion real estate investment trust is manipulating its accounting for a key profitability metric – adjusted funds from operations – and overstated that figure by at least 22 per cent in 2023. The short seller also said Equinix trades at elevated levels even if financials are taken “at face value.”
A representative for Equinix didn’t immediately respond to a request for comment.
Equinix has determined not to proceed “at this time” with its planned offering of nine-year euro bonds, according to a person familiar with the matter, who asked not to be identified because they’re not authorised to speak about it.
[ Google Ireland head Adaire Fox-Martin to depart for Equinix ]
Earlier this month, Equinix said Ms Fox-Martin will become its new president and chief executive officer in the late second quarter, with current CEO Charles Meyers moving to an executive chairman role. The company has been expanding its data centre footprint, opening buildings in cities including Dublin and Frankfurt.
In 2023, its revenue rose 13 per cent from a year earlier, and its AFFO was up 11 per cent. The data centre owner has said that accelerating growth in artificial intelligence is helping to drive demand for its properties. But Hindenburg argues that the AI boom poses a risk to Equinix’s outlook, as AI growth will potentially double power demands at Equinix’s properties and require many centres to be upgraded. And it’s accounting methods have given the market the impression that Equinix is a “cost-leading outlier” in the market, Hindenburg alleged.
“This false impression, combined with general market euphoria for AI, has resulted in investors rewarding Equinix as though it is a key AI beneficiary, when the opposite seems true: AI poses a risk to Equinix’s already power-constrained facilities,” the short seller said. –Bloomberg