AppLovin defended its business practices in response to short sellers and hired a law firm to investigate recent short-report activity. AppLovin stock rose Friday on the news.
In a detailed note on the company's website late Thursday, Chief Executive Adam Foroughi explained that AppLovin uses industry-standard practices in its data collection. AppLovin provides software for app developers to market, monetize and analyze their apps. It offers advertising and e-commerce-related services.
"The AppLovin Axon pixel isn't unique in form or function compared to Meta and Google pixels," Foroughi said. "All three collect standard ad tech data, rely on website owners for implementation, and benefit from Shopify's uniform data appending."
A pixel in this context is a small piece of code used to track user activity on a website or app.
On Thursday, short seller Muddy Waters Research said AppLovin is at risk of being deplatformed because of questionable business practices.
"The Muddy Waters report may exaggerate AppLovin's practices to stoke fear, but the mechanics — JavaScript tracking, event-based data, merchant-driven integration," are industry standard, Foroughi said. "There's no smoking gun here; AppLovin's pixel is just another player in a crowded, well-trodden field."
Muddy Waters is the fourth short seller since late February to target AppLovin stock. On Thursday, AppLovin stock tumbled 20.1% to close at 261.70.
AppLovin Stock Rises After Steep Drop
In morning trades on the stock market today, AppLovin stock rose 4% to 272.33.
"Our business is technical," Foroughi said. "It's not always easy to understand. It's also incredibly hard for some who don't understand this technology to fathom that we are building the world's best advertising AI model, so they need a simple narrative that we're violating policies in order to comprehend our success. This complexity leaves room for short reports to stir fear and doubt. To investors, I'd say: dig deeper. Given the AI tools available today, it's easy to discredit a short report like this in minutes."
Meanwhile, AppLovin announced Friday that it has retained Alex Spiro, partner and co-chair of the Investigations, Government Enforcement & White Collar Defense Practice at Quinn Emanuel Urquhart & Sullivan, a nationally recognized legal firm with deep expertise in securities and corporate investigations, to conduct an independent review and investigation into recent short report activity targeting AppLovin.
Benchmark analyst Mike Hickey on Friday reiterated his buy rating on AppLovin stock with a price target of 525.
In a client note, Hickey said Foroughi's rebuttal highlighted the company's e-commerce strength, competitive advantages and use of industry-standard practices.
"The message was clear: AppLovin's success is rooted in sophisticated technology and operational rigor, not opaque or unethical practices," Hickey said.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
