Equinix Greets an Unexpected Visitor: “Oh, Look, It’s Elliott Capital Management”
The Activist Investor Might Need to Modify Its Cookbook
Elliott Capital Management, the notorious activist investor, is at it again. Having recently pounded the table in the Hewlett-Packard Enterprise (HPE) boardroom, it’s now girding to rattle the datacenter cages and colocation cabinets at Equinix, the interconnection-oriented datacenter operator and real estate investment trust (REIT).
Let’s consider Elliott’s incursion at Equinix. We don’t know precisely how Elliott’s gambit will unfold, or whether it will successfully “unlock,” as the financial wizards say, latent value at Equinix. Those fates will be determined in due course. Nonetheless, we can already perceive the opportunities and risks inherent in Elliott’s initiative.
No investor bats 1.000, a fact Elliott would readily concede. The truth is, an activist investor doesn’t have to run every table to make money. Instead, it merely has to post a decent batting average, with a few extra-base hits, including the occasional home run, to produce enviable returns on investment. A high slugging percentage, to continue our baseball metaphor, is actually preferable to a high batting average, presuming one can’t have both. Despite whiffing at the plate occasionally, Elliott does well enough to stay in the game and earn a prosperous living in the process.
You can see why Elliott was attracted to Equinix. The company’s shares were in the doldrums, sinking in value as the year progressed, down about 16% or so since we welcomed the luminous dawn of 2025. At the same time, Equinix isn’t a lost cause as a stock; it can be redeemed in shareholders’ eyes. Elliott believes it has just the right tonic and fitness regimen to put Equinix back in the big time.
Reuters reports on the trigger for Elliott’s move:
Elliott swooped in after Equinix investors were caught off guard at the company's analyst day last month by news of a higher than expected capital expenditure plan that sparked a sharp sell-off. The stock price tumbled 18% in the two trading sessions following the June 25 analysts day, the first for Equinix's new chief executive officer, Adaire Fox-Martin.
Demand for data centers is growing as AI adoption grows and analysts have said Equinix is positioned to capture some of the demand.
Well-Thumbed Cookbook
As a REIT and a company that runs datacenters worldwide, Equinix claims valuable real estate and assets. Elliott can see an opportunity to wring more efficiencies and value from Equinix’s assets, and to grow those assets beyond the company’s current footprint.
When a company such as Equinix is underperforming, on relative if not absolute terms, an activist investor sees an opening to take a meaningful stake in the target and to pressure its board and CEO to make major changes. A struggling company, in a what-have-you-done-for-me-lately market, doesn’t have many friends willing to jump to its defense. In these situations, activist investors such as Elliott smell vulnerability and take deadly aim at their quarry. Board members and CEOs brace for impact when Elliott crashes through the boardroom door like a rampaging Kool-Aid Man.
Elliott Management follows a set formula, a prescribed recipe, in executing its playbook. First, it acquires a meaningful stake, enough to wield influence if not power, in a company that it perceives to be undervalued or underperforming, sometimes both. Next, once its presence is duly declared and recognized by all relevant stakeholders, Elliott engages (excuse the euphemism) with the company’s executive management and board of directors in rabid pursuit of changes to corporate strategy, governance, capital allocation, and operational efficiencies.
The activist investor’s recommendations, essentially forcible prescriptions, might include selling non-core assets, spinning off subsidiaries, discontinuing speculative projects, and — always high on the hit parade — returning cash to shareholders through stock buybacks and increased dividends.
In Elliott’s campaigns, boardroom putsches are often inevitable. Elliott pushes its own slate of board candidates to replace those it deems intransigent or unhelpful. With board leverage comes the power to control the man or woman in the big chair, the CEO. If the CEO is not amenable to Elliott’s ministrations, the CEO is subject to ouster, as has happened at companies such as Starbucks, Goodyear, and, in the sphere of information technology, Citrix. Elliott recently indicated that it desired the removal of Antonio Neri at HPE. If you’re a CEO and Equinix comes calling at your company, you might want to begin thinking about conciliation strategies or a new job.
Elliott typically favors dialogue, but it doesn’t take no for an answer. Perhaps I should say, Elliott likes to give negative feedback but doesn’t like receiving it. If the target company and its board resists the changes prescribed by Elliott, the activist (marauding?) investor will air its case publicly, appealing to shareholders though open letters and other hostile forms of agitation. If resistance to Elliott isn’t always futile, it’s definitely not welcome.
AI’s Moveable Feast Favors Gluttony
The approach Elliott takes is aggressive and persistent. The target company is meant to feel relentless pressure until a resolution is reached.
Elliott researches and stalks its targets well in advance of making its intentions known to its prey. I assume that Elliott has done considerable preparatory research on Equinix. Nonetheless, the problem here is that the rise of AI has introduced an inflection point that renders past performance less helpful as a sound basis for extrapolation of probable future scenarios.
Before the increasingly rapid ascent of AI, Equinix was well placed, as an interconnection-oriented datacenter operator, to play an integral role in the realization of multicloud strategies for enterprise customers. The demand for such services hasn’t vaporized, to be sure, but vendors and enterprise customers are choosing to prioritize AI over practically everything on their agendas.
Another challenge for Equinix, and for Elliott as its value-chasing predator, is that the quest for AI leadership entails a datacenter arms race, one that the hyperscalers, by dint of their prodigious resources, are well placed to continue winning. There might be a limit as to how many datacenters the world can sustainably support, but nobody is flashing the stop sign yet, and the buildouts are approaching warp speed. If Elliott pulls back hard on Equinix’s capex, will Equinix be able to reserve and keep a seat at the AI table? When it comes to capex in a cap-heavy industry, there’s a fine line between achieving increased efficiency and putting yourself on an enervating starvation diet.
Elliott has a well-thumbed cookbook for its spartan repasts, but richer palates attend AI’s feasts. In its approach to Equinix, Elliott might need more finesse and subtlety than it has demonstrated in past forays.