AppLovin shares dive 19% after latest short-seller report

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Shares in ad tech firm AppLovin dived by approximately 19% following the release of another short-seller report questioning the company’s advertising practices.

Investment firm Muddy Waters has published a new report largely focused on its concerns around a potential violation of Apple and Google’s terms of service on their respective app stores, which it claimed could risk AppLovin being deplatformed. It claimed that if it isn’t, competitors will start copying its techniques.

The company revealed its short position on AppLovin alongside the report.

Continued allegations

The news comes a month after other short-sellers Fuzzy Panda Research and Culper Research published their own analyses questioning its business practices.

Claims against the ad tech firm included accusations it could inflate its metrics, while also citing a class-action lawsuit accusing AppLovin of tracking users without their consent, including children.

At the time, shares dived by as much as 20% compared to the previous day’s close.

AppLovin CEO Adam Foroughi responded to the claims back in February, calling out “nefarious” short-sellers “driving down our stock price for their own financial gain”. He said the reports were “littered with inaccuracies and false assertions”, and denied a number of the allegations.

It should be noted that short-sellers effectively bet on a company’s share price falling, from which they make returns. This was recently seen in a Hindenburg Research report that made claims against Roblox, which ultimately did not have much impact on the company’s stock.

Update: AppLovin CEO Adam Foroughi has issued a statement disputing the report from Muddy Waters. 

“The report suggests our advertising stack is simple to replicate,” he said.

“If that’s true, how did we become the largest marketing channel in gaming globally? How did we ramp our web business to a billion-dollar run rate in months? The answer is execution and innovation. Our competitors – many with decades of head starts – haven’t matched our speed or scale. Building what we have takes more than a good idea; it takes relentless focus and execution, which we have consistently demonstrated.”

Foroughi added: “Our business is technical, and we get it – it’s not always easy to understand.

“It’s also incredibly hard for some who don’t understand this technology to fathom that we are building the world’s best advertising AI model, so they need a simple narrative that we’re violating policies in order to comprehend our success.

“This complexity leaves room for short reports to stir fear and doubt. To investors, I’d say: dig deeper. Given the AI tools available today, it’s easy to discredit a short report like this in minutes.”