March 27 (Reuters) - Shares of Kyndryl KD.N fell more than 11% on Thursday, after a research report from short-seller Gotham City alleged the IT services provider has manipulated certain financial metrics.

Gotham City said Kyndryl manipulated its reported adjusted EBITDA and adjusted free cash flow to give the appearance of profits and cash flow while in reality it generated losses and burned cash.

"An economically realistic calculation of FCF shows that the company has never generated free cash flow, which should be particularly concerning that revenue has declined every single year," the report said.

Kyndryl is a former infrastructure services business of IBM IBM.N and operates in the consulting and IT industry where it has been benefiting from higher demand for its offerings due to a push into artificial intelligence.

Gotham City also said the company faces "much higher" additional costs to IBM than the market thinks and the escalation in costs "will unravel the misleading narratives that management has relied on to boost the stock".

It added Kyndryl faces up to $1 billion-$2 billion bump to cost of services over the next few years.

Additionally, the short-seller said it has identified accounting and disclosure irregularities regarding Kyndryl's reported payments to IBM from 2019 to 2023.

Kyndryl did not immediately respond to a Reuters request for comment.

(Reporting by Zaheer Kachwala in Bengaluru; Editing by Krishna Chandra Eluri)

((Zaheer.Kachwala@thomsonreuters.com;))