Key Takeaways
- • The SEC has ended its investigation into Equinix and will not refer the alleged stock manipulation matter for further action such as a lawsuit, according to a filing Equinix disclosed Thursday.
- • The probe followed a March 2024 Hindenburg Research short-seller report alleging Equinix oversubscribed its power capacity and used accounting gimmicks to inflate growth metrics; Equinix denied the allegations.
- • Equinix said it does not expect further action related to the state investigation, and a shareholder class action over capital expenditure reporting was previously resolved for $41.5M in July.
- • Equinix posted $2.3B in third-quarter revenue, up 5% year over year, and $474M in operating income, up 12%, while shares trade more than 18% below their level at the start of the year.
Summary
The Securities and Exchange Commission has ended its investigation into Equinix, the data center real estate investment trust disclosed Thursday in an SEC filing. According to the filing, the SEC does not plan to refer the investigation into alleged stock manipulation for further enforcement action, such as a lawsuit. Equinix also said it does not expect any further action related to a state investigation. The REIT did not respond to a request for comment Thursday morning, and an SEC spokesperson declined to comment, in line with the agency's policy against confirming the existence of investigations.
The probe traces to March 2024, when Hindenburg Research, an activist short-seller, alleged that Equinix was using accounting gimmicks to inflate key growth metrics. Hindenburg specifically accused the company of oversubscribing its power capacity, effectively promising customers electricity it did not have. Equinix denied the allegations. Days after the report, the company disclosed a subpoena from the SEC's enforcement division and the U.S. Attorney's Office for the Northern District of California. A shareholder class action followed, alleging that Equinix manipulated reported capital expenditures to boost adjusted funds from operations. Equinix agreed to pay $41.5M in July to resolve that case in the U.S. District Court for the Northern District of California.
Equinix's shares were trading around $850 just before the Hindenburg report. A sell-off through April pushed them to about $700, before the stock recovered to a 52-week high of $994 in December. The stock was in positive territory Thursday morning but remained more than 18% below its start-of-year level. The company reported $2.3B in third-quarter revenue, up 5% from the prior year, and operating income of $474M, up 12%. Equinix, a colocation specialist with more than 270 data centers across six continents, is expanding rapidly as artificial intelligence demand grows, with 58 projects under development worldwide. The company was founded in 1988 and became a REIT in 2015.
The outcome comes amid broader SEC enforcement trends. According to a Cornerstone Research report, the SEC brought 30% fewer enforcement actions against public companies this year than last. Cornerstone's Sara Gilley, one of the report's authors, said the decline was larger than typical leadership-transition effects, noting that the year stood out for record highs and lows and unusually low monetary settlements. Paul Atkins took over as SEC chair in April.
The probe traces to March 2024, when Hindenburg Research, an activist short-seller, alleged that Equinix was using accounting gimmicks to inflate key growth metrics. Hindenburg specifically accused the company of oversubscribing its power capacity, effectively promising customers electricity it did not have. Equinix denied the allegations. Days after the report, the company disclosed a subpoena from the SEC's enforcement division and the U.S. Attorney's Office for the Northern District of California. A shareholder class action followed, alleging that Equinix manipulated reported capital expenditures to boost adjusted funds from operations. Equinix agreed to pay $41.5M in July to resolve that case in the U.S. District Court for the Northern District of California.
Equinix's shares were trading around $850 just before the Hindenburg report. A sell-off through April pushed them to about $700, before the stock recovered to a 52-week high of $994 in December. The stock was in positive territory Thursday morning but remained more than 18% below its start-of-year level. The company reported $2.3B in third-quarter revenue, up 5% from the prior year, and operating income of $474M, up 12%. Equinix, a colocation specialist with more than 270 data centers across six continents, is expanding rapidly as artificial intelligence demand grows, with 58 projects under development worldwide. The company was founded in 1988 and became a REIT in 2015.
The outcome comes amid broader SEC enforcement trends. According to a Cornerstone Research report, the SEC brought 30% fewer enforcement actions against public companies this year than last. Cornerstone's Sara Gilley, one of the report's authors, said the decline was larger than typical leadership-transition effects, noting that the year stood out for record highs and lows and unusually low monetary settlements. Paul Atkins took over as SEC chair in April.
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