Editor’s Note: The article has been updated to include Equinix’s response to the accusations made by Hindenburg Research.

Short seller Hindenburg research has a new company in its crosshairs.

What To Know: Hindenburg has targeted data center firm Equinix Inc (NASDAQ:EQIX) in a new short report published on Wednesday and announced a new short position against the company.

The short seller claims Equinix inflated its profitability metrics and pitched investors an “AI pipe dream,” while insiders backed out of the stock.

In a statement to Benzinga, Equinix indicated that they are reviewing the allegations made by Hindenburg and will withhold further comment until the evaluation is completed.

The company stated, “We remain confident that our distinctive advantages create significant long-term opportunity for Equinix and continue to see Equinix as highly relevant to customers as they pursue their digital transformation agendas.”

Equinix shares fell as much as 7% in early trading Wednesday before bouncing back. The stock was down approximately 2% at the time of publication.

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The Details: Hindenburg alleged that Equinix has used accounting tricks to boost its adjusted funds from operations (AFFO). The short seller claims the company reclassified its capital expenditures reporting to make it appear more profitable than it is.

“Our investigation found that Equinix (i) bases its executive bonus compensation on the company's AFFO metric (ii) then manipulates its accounting for maintenance CapEx to overstate this AFFO figure, resulting in the illusion of vastly higher AFFO, higher executive bonus compensation and an inflated stock price,” the short seller said.

Hindenburg believes the alleged capital expenditures manipulation has boosted Equinix’s AFFO by about $3 billion cumulatively since 2015. Meanwhile, insiders have cash out more than $327 million in company stock since 2019, the short seller said.

The firm’s investigation involved 37 former employees of Equinix, as well as several industry experts and competitors. Equinix has over 10,000 customers, ranging from small businesses to large cloud providers like Amazon, Microsoft and Google.

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Photo: courtesy of Equinix.