10:16 AM EDT, 03/20/2024 (MT Newswires) -- (Updates with additional detail throughout.)

Equinix ( EQIX ) shares were down nearly 3.5% in mid-morning trading Wednesday after short-seller Hindenburg accused the company of manipulating its accounting.

In the published findings of its investigation, Hindenburg stated that Equinix ( EQIX ) manipulates its accounting for adjusted funds from operations, or AFFO, a key profitability metric for real estate investment trusts. Equinix ( EQIX ) overstated the metric by at least 22% in 2023, according to Hindenburg estimates.

A company can boost its AFFO by misclassifying "maintenance CapEx" as "growth CapEx," which makes it appear more profitable by giving the appearance that the cost to maintain its revenue base is lower than it really is, the report said.

Equinix ( EQIX ) transitioned into a REIT in 2015 and began using AFFO as a key metric in determining executive bonuses. That year, the company reported a 47% drop in maintenance CapEx, which led to an estimated 19% boost to AFFO, Hindenburg said.

Equinix ( EQIX ) also reported a spike in growth CapEx on its balance sheet, a trend that has continued for nearly 10 years, the report said. The shift has driven Equinix's ( EQIX ) outstanding non-GAAP reported AFFO metrics and enriched executives, according to the report.

Hindenburg noted its accusation "represents our opinion."

Representatives for Equinix ( EQIX ) did not immediately respond to a request for comment from MT Newswires.

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