AppLovin shares plunge 20% after third short-selling firm slams company's ad technology

Core Viewpoint - AppLovin is facing significant scrutiny from short-selling firms regarding its advertising practices, which are alleged to violate app store rules and involve data extraction without user consent [1][3][6]. Company Performance - AppLovin's stock experienced a dramatic decline of 20% on a single day, marking its steepest drop on record, following negative reports from short-sellers [3][2]. - The stock price fell from $65.92 to close at$261.70, reflecting a 19% decrease in 2025 after a previous surge of over 700% in the prior year due to excitement around its AI technology [2][3]. Short-Selling Reports - Muddy Waters Research is the third firm to publish a report raising investor skepticism about AppLovin, claiming systematic violations of app store terms and unauthorized data extraction from major platforms [1][2]. - Previous critiques from Fuzzy Panda Research and Culper Research also targeted AppLovin's AXON software, which was linked to its earnings growth [4][6]. Churn Rate Analysis - Muddy Waters reported a churn rate of approximately 23% among e-commerce advertisers using AppLovin's services, contradicting claims from AppLovin's CEO that there has been no churn [7][8]. - The analysis involved tracking 776 advertisers and finding that many had removed AppLovin's AXON pixel from their websites, indicating a potential loss of clients [8][7]. Company Response - AppLovin's CEO defended the company's practices in a blog post, criticizing short-sellers for making misleading claims and asserting the sophistication of their AI models [5][6]. - The CEO highlighted that the timing of the short reports coincided with the company's earnings report, limiting their ability to respond immediately [6].