AppLovin Stock Drops On Multiple Short Reports: Allegations Of Copying Meta, Creating 'Smoke And Mirrors Game' (UPDATED)

Editor’s Note: This article has been updated to include a response from AppLovin CEO Adam Foroughi addressing the short reports.

Shares of AppLovin Corporation APP were hit Wednesday with two new short reports adding to the targets against the high-rising stock.

Fuzzy Panda Research on APP: A new short report from Fuzzy Panda Research accuses AppLovin of stealing Meta Platforms' META data and more.

Fuzzy Panda Research said AppLovin's revenue, EBITDA and cash flow have soared, leading to an impressive return for the stock.

"Some investors and former employees have even praised AppLovin's CEO Adam Foroughi as the next Mark Zuckerberg. But no one seems to know what AppLovin does," the report says.

The report says AppLovin credits its success to Axon 2.0, a machine-learning algorithm that serves as a matchmaker for publishers and advertisers. The short report alleges that Axon 2.0 is a “House of Cards” and accuses it of “Ad Fraud.”

"We believe AppLovin has pulled every trick in the book. We've been told they are stealing data from Meta in their e-commerce push."

In response, Foroughi pushed back against the reports, arguing that short-sellers were attempting to undermine AppLovin's success.

“It's disappointing that a few nefarious short-sellers are making false and misleading claims aimed at undermining our success and driving down our stock price for their own financial gain, rather than acknowledging the sophisticated AI models our team has built to enhance advertising for our partners,” Foroughi said.

He also denied allegations of financial improprieties, emphasizing that AppLovin is a public company audited by a Big Four accounting firm and that claims regarding revenue misrepresentation have no basis whatsoever.

Meanwhile, the short report accuses AppLovin of exploiting consumer data in ways that could violate the app store policies of Apple and Google. The report said AppLovin risks a permanent ban from the mobile app stores.

"We believe these so-called dark ad practices explain the truth behind how AppLovin seems to have achieved its great growth. We believe Apple, Google and Meta all have a vested interest in putting a stop to it."

Fuzzy Panda Research was short shares of AppLovin at the time of the short report.

Read Also: AppLovin’s Stock Rallies After Solid Q4 Growth, Underscores Ability To Scale Profitably, Analysts Say

Culper Research on APP: A new short report from Culper Research said AppLovin could go down as "the single largest stock promotion" in some time.

The report alleges Axon 2.0 to be a "smokescreen" and not the claimed black box.

"In its mobile gaming business, we believe $APP has systematically deployed then exploited incredibly dangerous app permissions that enable in-app ads themselves to force-feed silent, backdoor app installations directly onto users' phones," the report says.

The report says AppLovin gets direct download permissions onto consumers’ phones, which helps with clicks and downloads of apps that boost its financials.

Like Fuzzy Panda Research, Culper says AppLovin risks being removed from app store platforms for violating terms.

"$APP now looks to parlay its mobile gaming promotion into e-commerce but here too we believe the company's push is smoke and mirrors."

Culper said AppLovin is copying Meta's homework and taking credit for it.

Speaking on AppLovin’s CEO, Culper said Foroughi previously created Social Hour and served as CEO from August 2008 to July 2010. Social Hour was banned from Facebook in 2009 for "misleading/scam-like advertisements."

Culper said the two biggest reasons they are short AppLovin are that the company's success in mobile gaming is based on exploitation of app permissions and that its e-commerce initiative is a "smoke and mirrors game."

APP Price Action: AppLovin stock is down 12% to $331.35 on Wednesday versus a 52-week trading range of $57.40 to $525.04. AppLovin stock is up 445% over the last year.

Read Next:

• Applovin Stock Soars On Q4 Earnings: Revenue Beat, EPS Beat, Strong Guidance And More

Photo: Shutterstock