AppLovin loses nearly $17 billion in market value as short sellers accuse it of fraud and tracking children's data
Two short-selling firms have issued reports on AppLovin, accusing the company of inflaiting its metrics and engaging in illegal practices. This led to sotck market turmoil, with the CEO refuting all the claims and calling them misleading.
On February 26, Culper Research and Fuzzy Panda Research published their reports against AppLovin. Below are some key takeaways:
- AppLovin is accused of stealing and reverse engineering data from Meta to boost its own tools and services;
- The company allegedly uses “manipulative end card practices” in ads, with buttons like “X” or skip do the exact opposite and instead redirect to the App Store;
- AppLovin’s CTRs of 30-40% are 10x the industry norms, leading to inlfated metrics and fake activity;
- An older version of the company’s SDK allegedly shows that it was “collecting 50 attributes on kids that could enable the company to fingerprint children and track their locations.”
As a result, AppLovin shares plunged 23%, the biggest intraday decline in the company’s history (via Bloomberg). The stock then slightly recovered, closing at $331 per share (-12%) and wiping off nearly $17 billion in market value (to $111 billion).
AppLovin CEO Adam Forough called these allegations “false and misleading,” adding that the reports are “littered with inaccuracies and false assertions.” In terms of collecting childern’s data, he noted that the company’s “terms and policies explicitly prohibit apps exclusively designed for and/or exclusively directed to children, partners from providing us with children’s data, and partners from initializing our SDK in connection with children’s data.”
Wedbush managing director Michael Pachter found it “inconceivable that no regulators, attorney generals nor legal authorities have yet begun an investigation,” also saying that “if AppLovin is, in fact, committing fraud, we find it highly unlikely that it has yet to face a legal challenge from former employees, Facebook, advertisers or competitors.”
Short sellers attacking large public company is nothing new. Last year, Hindenburg Research published a major report on Roblox, accusing the company of bloating its DAU and engagement metrics, as well as comprising child safety and turning the platform into “X-rated pedophile hellscape, exposing children to grooming, pornography, violent content and extremely abusive speech.” The company denied the claims and later announced major changes to its child-safety policies by giving parents more control over their kids.