AppLovin CEO Adam Foroughi responded to new short-selling allegations from Muddy Waters Research after the company’s stock experienced its largest drop on record on Thursday. In a blog post, Foroughi urged investors to “dig deeper” into the claims, stating that the report’s assertions regarding the effectiveness of their AI-powered advertising strategies could be easily disproven using artificial intelligence models like Grok.
The allegations from Muddy Waters came as part of a broader effort by short-sellers to generate skepticism about AppLovin’s technology. The company’s stock saw a massive surge last year, rising over 700%, but the latest report criticized AppLovin’s ad tactics for allegedly violating the terms of service of app stores by extracting proprietary IDs from major platforms such as Meta, Snap, TikTok, Reddit, and Google. In his response, Foroughi emphasized the technical nature of the business, acknowledging that the complexity of AppLovin’s operations can make it difficult for some to fully understand. He noted that the technology behind their AI advertising model is advanced, and that some critics may find it easier to suggest policy violations than to grasp the company’s success.
Following the release of Muddy Waters’ report, AppLovin’s shares rebounded by nearly 4% on Friday after a significant drop the previous day. This report followed earlier criticisms from other short-sellers, including Fuzzy Panda Research and Culper Research, who raised concerns about the company’s technology, particularly as it expands into e-commerce.
In response to these short-selling reports, AppLovin announced that it had hired Alex Spiro, a partner at the law firm Quinn Emanuel, to conduct an independent investigation into the short-seller activity targeting the company. Spiro, who has also represented prominent figures such as Elon Musk, was tasked with reviewing the allegations and ensuring that misinformation for personal gain would not go unchecked.
Despite the short-selling pressure, analysts from Loop Capital reaffirmed their positive outlook on AppLovin, maintaining a buy rating and a price target of $650. They expressed confidence in the company’s platform, stating that accusations of fraud and faulty conversions could be easily disproven through discussions with performance marketers and measurement companies. According to the analysts, AppLovin’s technology continues to deliver strong performance and significant revenue growth.
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