AppLovin Stock Plunges Amid New Short-Seller Attack
AppLovin Stock Plunges After Short-Seller Allegations
AppLovin's stock experienced its largest single-day drop on record Thursday, following a new short-seller report from Muddy Waters Research. The stock plummeted 20%, but recovered almost 4% on Friday. This is the third short-selling attack on AppLovin in recent months, with Fuzzy Panda Research and Culper Research previously issuing critical reports. The reports question the sustainability of AppLovin's burgeoning e-commerce advertising business and allege violations of app store terms of service.
Muddy Waters alleges that AppLovin's ad tactics "systematically" violate app store terms of service by improperly extracting user IDs from platforms like Meta, Snap, TikTok, Reddit, and Google. Their analysis suggests that approximately 52% of AppLovin's e-commerce conversions are retargeting efforts, with incrementality estimated at only 25%-35%. The report further claims a 23% e-commerce client churn rate in Q1. Muddy Waters contends that if AppLovin isn't deplatformed for these alleged violations, competitors will likely copy its methods, potentially hindering AppLovin's growth.
AppLovin CEO Adam Foroughi responded with a blog post urging investors to scrutinize Muddy Waters' claims. He argues that the complexity of AppLovin's AI-powered ad technology makes it susceptible to misinterpretations, and that the allegations of policy violations are easily disprovable using AI models like Grok. Foroughi also suggests that the reports aim to create fear and doubt.
In response to the repeated short-selling attacks, AppLovin retained Alex Spiro of Quinn Emanuel Urquhart & Sullivan LLP, a lawyer also representing Elon Musk, to conduct an independent investigation into the short-seller activity. A spokesperson stated that the firm aims to prevent the spread of misinformation for personal gain. Despite the negative reports, Loop Capital analysts maintained their buy rating on AppLovin, setting a $650 price target. They believe accusations of faulty conversions and fraud are easily refuted. AppLovin's stock price, however, has dropped significantly from $510 in mid-February to $270 as of Friday. The future impact of potential action from Google and Apple remains uncertain.
AppLovin's stock experienced its largest single-day drop on record Thursday, following a new short-seller report from Muddy Waters Research. The stock plummeted 20%, but recovered almost 4% on Friday. This is the third short-selling attack on AppLovin in recent months, with Fuzzy Panda Research and Culper Research previously issuing critical reports. The reports question the sustainability of AppLovin's burgeoning e-commerce advertising business and allege violations of app store terms of service.
Muddy Waters alleges that AppLovin's ad tactics "systematically" violate app store terms of service by improperly extracting user IDs from platforms like Meta, Snap, TikTok, Reddit, and Google. Their analysis suggests that approximately 52% of AppLovin's e-commerce conversions are retargeting efforts, with incrementality estimated at only 25%-35%. The report further claims a 23% e-commerce client churn rate in Q1. Muddy Waters contends that if AppLovin isn't deplatformed for these alleged violations, competitors will likely copy its methods, potentially hindering AppLovin's growth.
AppLovin CEO Adam Foroughi responded with a blog post urging investors to scrutinize Muddy Waters' claims. He argues that the complexity of AppLovin's AI-powered ad technology makes it susceptible to misinterpretations, and that the allegations of policy violations are easily disprovable using AI models like Grok. Foroughi also suggests that the reports aim to create fear and doubt.
In response to the repeated short-selling attacks, AppLovin retained Alex Spiro of Quinn Emanuel Urquhart & Sullivan LLP, a lawyer also representing Elon Musk, to conduct an independent investigation into the short-seller activity. A spokesperson stated that the firm aims to prevent the spread of misinformation for personal gain. Despite the negative reports, Loop Capital analysts maintained their buy rating on AppLovin, setting a $650 price target. They believe accusations of faulty conversions and fraud are easily refuted. AppLovin's stock price, however, has dropped significantly from $510 in mid-February to $270 as of Friday. The future impact of potential action from Google and Apple remains uncertain.
