TLDR
- AppLovin shares fell 20% on Thursday after Muddy Waters issued a short report
- This follows earlier reports from Fuzzy Panda, Culper Research, and The Bear Cave
- Muddy Waters alleges data misappropriation and violation of platform terms of service
- CEO Adam Foroughi defended the company, calling the reports “false and misleading”
- Despite the drop, AppLovin stock rebounded 9.5% in Friday’s premarket trading
The Short-Seller Attack
AppLovin Corporation saw its shares tumble 20% on Thursday. This marked a record one-day drop for the ad tech company.
The steep decline came after Muddy Waters Research revealed it had taken a short position in the company. Muddy Waters is known as one of the most feared short-sellers on Wall Street.
This isn’t the first time AppLovin has been targeted by short-sellers. It’s at least the third report against the company in about a month.
In February, both Fuzzy Panda and Culper Research published short reports. These came just days after The Bear Cave issued its own cautious piece on AppLovin shares.
Allegations Against AppLovin
Muddy Waters’ report contains serious accusations against the ad tech firm. It alleges that AppLovin is “impermissibly extracting proprietary IDs” from major platforms.
These platforms include Meta, Snap, TikTok, Reddit, and Google. The report claims this is done “to target ads without user consent.”
Muddy Waters believes these practices likely violate the platforms’ terms of service. Earlier reports made similar claims about AppLovin’s business practices.
The February reports from other short-sellers alleged that AppLovin misrepresents the benefits of its AI platform. They also claimed the company forces app installations to drive up revenue.
Company Response
AppLovin’s CEO Adam Foroughi has strongly defended the company. He responded to the February reports in a blog post dated February 26.
Foroughi called the reports full of “inaccuracies and false assertions.” He expressed disappointment that “nefarious short-sellers” were making “false and misleading claims.”
The CEO suggested these reports were aimed at undermining AppLovin’s success. He believes short-sellers are trying to drive down the stock price for their own financial gain.
Following the Muddy Waters report, Foroughi published another blog post on Thursday. He acknowledged that AppLovin’s business is technical and “not always easy to understand.”
“This complexity leaves room for short reports to stir fear and doubt,” he wrote. He advised investors to “dig deeper” into the company’s operations.
Foroughi added that with AI tools available today, “it’s easy to discredit a short report like this in minutes.” His message emphasized that AppLovin’s success comes from sophisticated technology and operational rigor.
Market Performance
Before these short-seller attacks, AppLovin was one of the top-performing technology stocks in 2024. The company’s shares gained more than 700% last year.
This meteoric rise was driven largely by the artificial intelligence frenzy that boosted many tech stocks. AppLovin’s success led to its addition to the Nasdaq 100 Index in November.
This inclusion further boosted gains and pushed AppLovin to a market valuation of more than $110 billion by the end of 2024. However, the stock has faced challenges in 2025.
So far this year, AppLovin shares are down 19% through Thursday’s close. The recent short-seller reports have contributed to this decline.
Despite the sharp drop on Thursday, AppLovin stock showed resilience on Friday. Shares climbed 9.5% to $286.60 in Friday’s premarket trading.
This bounce occurred while futures tracking the benchmark S&P 500 were down 0.2%. The recovery suggests some investors may see the price drop as a buying opportunity.
Analyst Sentiment
Despite the multiple short reports, Wall Street remains largely bullish on AppLovin. The company has 21 buy ratings, six holds, and only one sell, according to data compiled by Bloomberg.
Many analysts defended AppLovin after the February short-seller attacks. These included analysts at Wedbush, Benchmark, Citi Research, Bank of America, and William Blair.
Some even called the stock price decline a buying opportunity. Benchmark analyst Mike Hickey maintained his Buy rating on the stock after the latest controversy.
Hickey has set a $525 price target for AppLovin. This target implies shares can climb 101% from their current level.
In his research note discussing Foroughi’s blog post, Hickey emphasized AppLovin’s legitimate business practices. He noted that the CEO’s message was clear about the company’s foundation in sophisticated technology and operational rigor.
As of Friday morning, AppLovin had not provided an official response to Barron’s request for comment regarding the Muddy Waters report. However, the CEO’s blog posts represent the company’s current stance on the matter.
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