TLDR
- SEC investigators are examining AppLovin’s data-collection methods following whistleblower complaints and short-seller accusations.
- The probe focuses on potential violations of service agreements with platform partners like Meta, Amazon, and Google.
- APP stock plunged 14% Monday and dropped another 3% Tuesday in premarket trading after investigation details surfaced.
- AppLovin’s market cap reached $230 billion before the selloff, with the company joining the S&P 500 in September.
- Short-sellers accused the company of unauthorized user fingerprinting, which AppLovin has repeatedly denied.
AppLovin stock continued its decline Tuesday, falling 3% in premarket trading after a 14% drop Monday. The selloff came after reports revealed the SEC is investigating the mobile advertising company’s data-collection practices.
The Securities and Exchange Commission is examining whether AppLovin violated service agreements with platform partners. The goal allegedly was to deliver more targeted advertising to consumers.
Officials from the SEC’s cyber and emerging technologies enforcement unit are leading the investigation. The probe began after a whistleblower complaint was filed earlier this year.
Multiple short-seller reports published in recent months also prompted regulatory scrutiny. The SEC has not accused AppLovin or its executives of wrongdoing at this stage.
What the Investigation Covers
The investigation centers on allegations that AppLovin broke platform partners’ service agreements. Sources familiar with the matter say regulators are looking at how the company collected and used consumer data.
Short-sellers Fuzzy Panda and Muddy Waters published reports accusing AppLovin of unauthorized user tracking. They claimed the company harvested proprietary identifiers from other platforms without permission.
This practice, called fingerprinting, tracks users across different websites and apps for retargeting purposes. Apple’s App Store prohibits fingerprinting outright.
Google banned the practice until changing its policy in February. CEO Adam Foroughi denied the allegations in a March blog post.
He called the short reports “littered with inaccuracies” and said the company doesn’t create device fingerprints. AppLovin hired prominent attorney Alex Spiro to investigate the short reports.
The company said Monday that Spiro is examining why “clearly false reports” were published. His investigation continues.
Impact on AppLovin’s Valuation
The timing is painful for AppLovin investors. The company’s market cap nearly doubled this year to over $230 billion before the selloff.
APP joined the S&P 500 Index in September. The stock had gained 80% year-to-date and climbed more than 325% over 12 months before Monday’s decline.
AppLovin’s platform partners include Meta, Amazon, and Google. Apps using AppLovin’s ad-delivery technology must follow app store rules from Google and Apple.
It’s unclear which partner relationships the SEC is scrutinizing. There’s no indication regulators are examining the conduct of those partners.
Recent Trading Activity
The two-day selloff erased billions in market value. Monday’s 14% drop was AppLovin’s worst single-day performance since April.
Tuesday’s premarket decline suggested investor concerns weren’t fading quickly. The company helps mobile app developers find users and sell advertising in their applications.
Its technology has made AppLovin a major player in app monetization. The SEC probe adds uncertainty to a sector already facing increased regulatory oversight.
AppLovin declined specific comment on the investigation. The company said it regularly engages with regulators and addresses inquiries through normal channels.
Material developments would be disclosed through appropriate public channels, AppLovin added. The SEC’s public affairs office did not respond to requests for comment due to the government shutdown.
