Firm says its accounting was accurate.
Equinix has agreed to pay $41.5 million to settle a class action that alleged it misled its shareholders.
Filings with the US District Court of California show the colo firm has agreed a settlement with the plaintiffs in the lawsuit, a group of shareholders led by the Uniformed Sanitationmen's Association Compensation Accrual Fund, a pension fund for New York City sanitation workers.
The suit was launched in May 2024 following the release of a report by Hindenburg Research, the now disbanded analyst firm run by well-known Wall Street short-seller Nate Anderson, which accused Equinix of accounting manipulation.
According to Hindenburg’s March 2024 report, Equinix overstated its adjusted funds from operations (AFFO), a key profitability metric for REITs. It claimed that when Equinix became a REIT in 2015, it began using AFFO as a key metric to determine executive bonuses, and that same year reported a sudden 47 percent drop in maintenance CapEx, leading to a 19 percent increase in the AFFO.
Hindenburg also stated that the company has been misclassifying "maintenance CapEx" as "growth CapEx," which in turn makes the company's maintenance costs look lower and Equinix seem more profitable.
This allegedly enabled the company’s executives to receive $476m in bonuses between 2015-2023, Hindenburg said.
Following the release of the report, Equinix launched an investigation, carrying out an internal audit that it found its accountancy practices to be “accurate.”
The Hindenburg also accused Equinix of overselling the available power capacity to its 260 data centers around the world. The settlement agreement still needs to be agreed upon by the court.
An Equinix spokesperson confirmed a settlement had been reached, and said: "Equinix has consistently denied the allegations raised in the lawsuit and is settling to avoid the time, costs, and uncertainties associated with protracted litigation. The settlement is not an admission or finding of fault or wrongdoing, and it is subject to court approval. It is expected to be entirely funded by insurance, with no payment made by Equinix.
