Key Takeaways
Shares of AppLovin (
APP
) tumbled as much as 22% on Wednesday after two
short-seller
firms published reports on the technology company, alleging a variety of fraudulent and deceptive practices.
Shares of the tech company rose
more than 700% in 2024
, making it the top gainer in the
Russell 1000
index last year. Shares surged amid
rising revenue
and
investor enthusiasm
that its “AXON 2.0” artificial intelligence model was making its product of matching advertisements to mobile games more efficient.
AppLovin declined to comment Wednesday on the short-sellers’ reports.
AppLovin shares peaked at a record close of $510.13 earlier this month, a gain of more than 57% from the start of the year. That high has been followed by seven straight losing sessions, as enthusiasm for several
AI-related stocks
has grown
shakier in recent weeks
.
Culper Research Calls AI Talk ‘Smokescreen’
The Culper Research short-seller report alleges that AppLovin’s claims of the
AI
-powered effectiveness of AXON 2.0 are a “smokescreen” to distract from its real growth drivers.
“We believe AppLovin’s success has been driven not by AI, but by the systematic integration and exploitation of notoriously dangerous app permissions that silently trigger backdoor app installations,” Culper Research analysts wrote.
AppLovin’s software, which Culper’s report says can come pre-installed on a variety of
Android
phones, allows for the direct download of apps without having to go through Alphabet’s (
GOOGL
) Google Play Store. That has allowed AppLovin to create ads, placed in mobile games, that can download other mobile games without a user’s consent, making its ads appear more effective and generating more per-install
revenue
, the short seller alleges.
Fuzzy Panda Says AppLovin’s E-Commerce Ad Product Uses Meta Data
The other AppLovin report, from Fuzzy Panda Research analysts, meanwhile, accuses AppLovin’s growing e-commerce advertising business of effectively “stealing data” from Meta Platforms (
META
).
They allege that AppLovin uses data from customers advertising on Meta’s platforms like Facebook and
Instagram
to “reverse engineer” Meta’s ad data, again making their ads appear more effective than they would be on their own. They also claim AppLovin’s software can track users without their consent, including children.
“Even without large fines by the [Federal Trade Commission] or for violating California privacy laws, the power to stop AppLovin’s atrocious business practices lies in the hands of three of the largest tech companies — Apple, Google and Meta,” the short seller wrote, saying that it expected all three companies to take action against AppLovin’s software.
Recently, AppLovin’s stock was off nearly 16% at about $318, but that price is nearly five times what the stock was worth a year ago.
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