Why did Equinix Stock Drop in March?

Equinix, Inc. is an American corporation based in Redwood City, California, that specialises in Internet connection and data centres. The firm has the largest market share in the global colocation data centres with 260 data centres in 33 countries across five continents.

It is traded on the Nasdaq exchange under the ticker symbol EQIX. At the end of December 2023, it had about 13,000 employees globally. It has been a REIT (a real estate investment trust) since January 2015.

Before we discuss the latest news about Equinix and why its stock slumped in March, let’s see when how the company began and who its latest CEO is.

Early beginnings

Equinix was first established as a vendor neutral multitenant data centre provider where leading network operators met to interconnect networks and share traffic in Silicon Valley, California in 1998.

The name of the company, Equinix, focuses on the three central pillars of the business: equality, neutrality and Internet exchange. Equinix has recently started building the global platform for its customers for digital business called Platform Equinix.

Today, Equinix serves enterprises, networks, service providers, and innovators from all around the world. Digital leaders worldwide leverage Equinix’s trusted platform to interconnect the fundamental infrastructure that generates their success.

Google head to become CEO of Equinix

Charles Meyers, the current president and CEO, will be promoted to executive chairman, while Adaire Fox-Martin, the current Google Cloud go-to-market president, will assume Meyers’s current positions in the second quarter. The current executive chairman of the company, Peter van Camp will relinquish his position as a board member to take on the role of ‘special advisor’ to the board.

Meyers was hired by the company in 2010 and was made CEO in 2018. Throughout his service, he has been a key player in the expansion of the Platform Equinix offering to more than 70 markets across 33 countries – which support cloud data management and storage vendors, managed services providers, network as-a-service (NaaS) providers, communications service providers and enterprises.

Meyers said: “I am confident that Adaire’s capabilities and experience will be deeply additive to our team and our culture, helping us meet the evolving needs of our customers, fuel our growth and unlock the extraordinary power of Platform Equinix.” He added: “I am grateful to our board for their support of my desired transition timeline. As executive chairman, I will actively support Adaire as she leverages her tremendous global experience to extend and expand our market leadership.”

A firm believer in the transformative potential of technology, Fox-Martin has over 25 years of experience in the technology sector. She is currently the head of Google Ireland, and is the global president of go-to-market for Google Cloud – leading sales, professional services, the partner ecosystem, and customer success efforts. Before Google, she worked as a senior executive in both SAP and Oracle at a global level. The Equinix CFO hire is a very appropriate one as she has been a member of the Equinix board of directors since 2020.

Discussing her new role, Adaire said: “In today’s dynamic digital landscape, Equinix has uniquely amassed global reach, highly differentiated ecosystems, strong partner relationships, and an innovative range of product and service offerings, collectively forming a robust and future-proofed platform to address diverse customer challenges,” said Fox-Martin. “I will leverage my experience to drive continued innovation and growth.”

Dell, NetApp, Pure Storage and Seagate are all backed by Equinix’s colo datacenters.

March 2024: Equinix stock slumps

The stock prices of data centre real estate investment trust Equinix Inc. plummeted on Wednesday (20 March 2024) after Hindenburg, a short seller, sold the stock as it raised accounting and AI-related concerns.

Hindenburg accused Equinix of fudged financial numbers, rotten core business, and for selling an AI “pipe dream.”

The short seller also noted that a few of Equinix’s insiders had sold their shares, raking in millions of dollars.

Equinix confirmed it is reviewing the allegations set forth by Hindenburg but declined to comment further until that review was concluded.

Accusations of questionable accounting

Short seller Hindenburg Research stated that it had a short position in the data centre and interconnection services real estate investment trust and questioned the honesty of the company in terms of accounts and claims about the company’s capabilities to explore the use of AI.

The report published on Wednesday allegedly brought forth the decision after extensive research, including interviews with the former employees. It accused Equinix of “major accounting manipulation, core business decay, and selling an AI pipe dream as insiders cashed out hundreds of millions”.

On Wednesday, Equinix announced that it was reviewing Hindenburg’s allegations: “Even though these claims are significant for us, we will not respond to them during the study. When the review is finished, we will report as much as it is necessary.”

The Hindenburg report argues that Equinix Company over reported its adjusted funds from operations (AFFO) by 22% in 2023. It remarked that the company’s major key revenue earners, the leasing of data center rack space and the provision of direct, fast connections between customers and providers, were “being disrupted by large cloud providers, such as Amazon.com Inc., Google, and Microsoft Corp.

AI boom and Equinix

The activist investor additionally highlighted that investor’s view Equinix as one of those companies which stands to gain from the rocketing demand for AI. But, at the same time it contended that Equinix’s power-constrained facilities do not sustain the electrical demand needed for AI products.

Besides that, the report stated that Equinix insiders have sold more than about $327 million in company stock since 2019, including approximately $112 million sold by its chief executive officer.

To conclude, Hindenburg noted that Equinix’s premium valuation, claimed market dominance and growth prospects will soon reverse course.

Equinix (EQIX) did reach an all-time high earlier in March 2024. The stock closed the session on Wednesday down 2.3% at $824.88, after dropping as low as $796.90 during trading hours.

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