AppLovin Stock Tumbles as Short Sellers Allege AI-Fueled Growth a

Shares of AppLovin tumbled on Wednesday after the release of two reports about the company from short sellers.
The reports alleged a variety of fraudulent and deceptive practices that the authors believe could get AppLovin’s services blocked by Apple, Meta Platforms, and Google.
Wednesday’s stock plunge marked AppLovin’s seventh straight losing session.

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.

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.

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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