TLDR
- The SEC is investigating AppLovin’s data-collection practices following whistleblower complaints and short-seller reports filed earlier this year.
- The probe examines whether AppLovin violated platform partners’ service agreements to deliver more targeted advertising to consumers.
- AppLovin shares dropped 14% on Monday and fell another 3% in premarket trading Tuesday following news of the investigation.
- The company’s market valuation nearly doubled this year to over $230 billion, and it was added to the S&P 500 Index in September.
- Short-seller reports from Fuzzy Panda and Muddy Waters accused AppLovin of unauthorized user tracking through fingerprinting, which the company has denied.
AppLovin shares tumbled for a second straight day on Tuesday as details emerged about an ongoing SEC investigation into the mobile advertising company’s data-collection practices. The stock fell 3% in premarket trading after dropping 14% on Monday.
The Securities and Exchange Commission is examining whether AppLovin violated service agreements with platform partners to push more targeted advertising to consumers. Enforcement officials from the SEC’s cyber and emerging technologies unit are handling the matter.
The investigation stems from a whistleblower complaint filed earlier this year. Multiple short-seller reports published in recent months also caught the regulator’s attention.
AppLovin declined to provide specific comments about the probe. The company said it regularly engages with regulators and addresses inquiries in the ordinary course of business.
The SEC has not accused AppLovin or its executives of wrongdoing. These probes don’t always result in enforcement actions, but they can lead to fines if violations are found.
The investigation creates an uncomfortable twist for a company that’s been on a tear this year. AppLovin nearly doubled its market valuation to more than $230 billion as of last week.
That puts it in the same league as Salesforce. The company joined the S&P 500 Index in September, capping off a remarkable run driven by interest in AI tools and ad placement technology.
Questions About Fingerprinting
Short-seller reports from Fuzzy Panda and Muddy Waters made serious accusations earlier this year. They claimed AppLovin abused its position in the mobile advertising ecosystem to harvest proprietary identifiers from other platforms without authorization.
This practice, known as fingerprinting, involves tracking users across different websites and apps to retarget them with advertising. Apple’s App Store prohibits this method.
Google banned it too until changing its policy in February. CEO Adam Foroughi pushed back hard against the allegations in a March blog post.
He called the short reports “littered with inaccuracies” and denied creating alternative identifiers or device fingerprints. AppLovin took things a step further by hiring Alex Spiro, a high-profile litigator from Quinn Emanuel Urquhart & Sullivan.
The company brought him in to conduct an independent review of the short report activity. On Monday, AppLovin said Spiro was specifically investigating the provenance of the reports and why “clearly false reports” were published.
Platform Partners in Focus
AppLovin’s platform partners include some of the biggest names in tech. Meta, Amazon, and Google all work with the company.
Apps that use AppLovin’s ad-delivery technology must also follow app store rules set by Google and Apple. It’s unclear which partner relationships the SEC is examining.
There’s no indication the agency is looking at the conduct of those partners as part of its probe. The company helps mobile app developers find users and sell advertising in their applications.
Its technology analyzes user behavior and optimizes ad performance. That’s made AppLovin a major force in app monetization over the past few years.
The stock had gained about 80% year-to-date before Monday’s selloff. Over the past 12 months, shares had climbed more than 325%.
AppLovin also showed interest in buying TikTok’s US operations earlier this year. That was before the Trump administration announced a plan to hand control of the app’s US operations to a consortium including Oracle.
The Monday and Tuesday trading sessions wiped out a chunk of those gains. The SEC investigation adds uncertainty to a sector already facing increased oversight in the US and Europe regarding data protection and privacy standards.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
