AppLovin's stock plummeted on Monday after the Securities and Exchange Commission (SEC) announced an investigation into its data collection methods. According to Bloomberg, the regulator is seeking to determine whether the US mobile advertising company has violated rules governing the distribution of targeted advertising. The investigation, which is still in its preliminary stages, was reportedly triggered by a complaint filed by a whistleblower and supported by several reports from short sellers. No charges have yet been filed. However, the stock lost 14%.
The stock, which has soared by over 700% in 2024, followed by another 80% this year, was heavily penalized on the stockmarket. This rise was based on the performance of its AXON advertising engine, powered by artificial intelligence. But the company, recently added to the S&P 500, has been facing recurring accusations of opaque practices for several months. Funds such as Fuzzy Panda, Culper Research, and Muddy Waters claim that AppLovin circumvents the policies of platforms such as Meta, TikTok, and Google (Alphabet) to illegally extract user identifiers for advertising targeting purposes.
Back in February, a report by Muddy Waters caused the stock to slump 12%. CEO Adam Foroughi defended his group's practices, accusing short sellers of manipulating the market for their own profit. The SEC investigation nevertheless marks a new stage in the standoff between AppLovin and its detractors, at a time when the adtech sector is subject to increased regulatory scrutiny in the US.
