(Bloomberg) — Two short sellers released reports on AppLovin Corp., touching off a record intraday rout of as much as 23% in shares of 2024’s best performing technology stock.
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Shares of AppLovin, which provides marketing services to app developers, pared some of those losses to close down 12% Wednesday, shedding nearly $17 billion in market value as investors unwound some of the blistering rally that saw shares rise eight fold last year. The stock was briefly halted for a volatility pause.
Fuzzy Panda and Culper Research both published short reports against the company, just days after The Bear Cave issued its own cautious report. The reports effectively allege that AppLovin misrepresents the benefits of its AI advertising platform and instead “force-feeds” app installations on to phones as a way to drive up revenue.
AppLovin’s Chief Executive Officer, Adam Foroughi, said in a Wednesday blog post that the reports “are littered with inaccuracies and false assertions.”
“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,” he wrote.
Wedbush analysts led by Michael Pachter called the short reports misguided in a note out Wednesday afternoon. They maintained their outperform rating and $620 price target on shares of AppLovin.
“If AppLovin is, in fact, committing fraud, we find it highly unlikely that it has yet to face a legal challenge from former employees, Facebook, advertisers or competitors. We also find it inconceivable that no regulators, attorney generals nor legal authorities have yet begun an investigation,” Pachter wrote. “It is important to note that APP’s financial reports are audited, and the auditors have not raised any fraud issues.”
Last year’s rally was concentrated in the fourth quarter, amid excitement over the company’s AI-powered advertising engine. It coincided with a rotation from semiconductor stocks into AI-linked software companies. AppLovin was also added to the Nasdaq 100 Index in November, replacing Dollar Tree Inc. While its valuation jumped by more than $100 billion over that span, its overall size remains small compared to trillion-dollar tech giants like Meta Platforms Inc. and Apple Inc.
