While some certainly took the accusations made by Hindenburg at face value (Equinix stock fell 5% on release of the report), analysts and industry insiders that Capacity spoke to seemed less convinced.
One of those analysts, Nick Del Deo from Moffett Nathanson, noted that while the examples cited in its report didn’t seem inappropriate, the long wait for the findings of Equinix’s audit committee’s investigation had made investors nervous.
“With each day that passed without an update – totalling six weeks – the market got more and more worried that there was a problem, with Equinix’s stock substantially underperforming the market,” he said in a research note.
But Equinix has finally denied any wrongdoing. “The audit committee has concluded that Equinix's financial reporting has been accurate, and that the application of its accounting practices has resulted in an appropriate representation of its operating performance,” it said in its Q1 2024 results, published today.
The investigation concluded that no adjustments to previously issued financial statements or non-GAAP measures are required, due to a lack of accounting inconsistencies or errors.
The audit committee consisted of members of Equinix’s board and independent third-party advisors, but this does not mark the end of the investigation.
On April 30, 2024, Equinix received a subpoena from the Securities and Exchange Commission, which follows a subpoena it received from the U.S Attorney's Office for the Northern District of California.
These investigations, Del Deo says, are standard for a situation like Equinix finds itself in.
Adjusted funds from operations (AFFO), a metric that is used to gauge the profitability of real estate investment trusts like Equinix came under fire from Hindenburg.
In Q1 Equinix reported AFFO of $843 million, a 22% increase on the previous quarter and a 5% increase year-on-year.
It attributed this to strong operating performance and seasonally lower recurring capital expenditures.
Equinix stock rose 11% in after hour’s trading following the news.
