A class action lawsuit was filed against Equinix Inc. (NASDAQ:EQIX) on May 2, 2024. The plaintiffs (shareholders) alleged that they bought Equinix stock at artificially inflated prices between May 3, 2019 and March 24, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought EQIX stock during that period can click here to learn about joining the lawsuit.
Equinix is a digital infrastructure company that provides data center, colocation, and interconnection solutions across the Americas, Europe, Middle East and Africa, and Asia-Pacific. Importantly, the company operates as a real estate investment trust (REIT).
The plaintiffs maintain that Equinix and two of its senior officers deceived investors by lying and withholding vital information about certain financial metrics, the efficacy of the company’s internal controls, and ancillary issues from SEC filings and related material.
The information became clear on March 20, 2024, when short seller Hindenburg’s report accused Equinix of manipulating its accounting for AFFO (adjusted funds from operations), an important profitability metric for REITs. The report noted that Equinix bases its executive bonus compensation on the AFFO figure. Accordingly, the company manipulates the maintenance capital expenditure or capex (which also includes expenditure for maintaining its data centers) amount to boost the AFFO and consequently, the bonus.
Interestingly, during the Class Period, Equinix stated in its SEC filing that it uses revenues, AFFO per share, and digital services revenues as the performance metrics in the RSUs (restricted stock units). Moreover, the company noted that management, including the CEO and CFO, investigated the internal controls and procedures and found them to be accurate.
As per the class action lawsuit, Equinix caused its stock to trade at artificially inflated prices by knowingly and recklessly misleading investors about the company’s business practices during the Class Period.
Notably, EQIX stock has declined nearly 5% in the past six months, adversely impacting shareholders’ returns.
