AppLovin's Stock Plummets 20% After Muddy Waters Report

AppLovin's stock price experienced a significant decline of 20% on Thursday, following the release of a critical report by Muddy Waters Research. The report raised serious concerns about the company's business practices, suggesting that AppLovin could face delisting from various platforms due to questionable activities. According to the report, AppLovin has been accused of misusing user data on third-party platforms, which violates the service terms of these platforms. The report estimated that 52% of AppLovin's e-commerce conversions are attributed to visitor recovery, a practice that raises significant ethical and legal concerns.

The report also highlighted a discrepancy between the company's claims and the actual data. Muddy Waters Research asserted that only approximately 25% to 35% of AppLovin's sales are incremental, contradicting the company's CEO's claim that e-commerce sales are nearly 100% incremental. This discrepancy was supported by an analysis of 776 AppLovin e-commerce clients in the first quarter, which revealed a churn rate of about 23%. The high churn rate further supports the negative outlook on the company's e-commerce business, suggesting that it is unlikely to achieve sustainable growth.

The negative report from Muddy Waters Research has sparked significant market reaction, with investors expressing concerns over the company's business integrity and future prospects. The report's findings have raised questions about AppLovin's compliance with industry standards and its ability to maintain its market position. The company's stock price decline reflects investor sentiment and the potential impact of regulatory actions or platform delistings on its operations. The report's allegations of data misuse and ethical violations have added to the uncertainty surrounding AppLovin's future, making it a challenging time for the company as it navigates these issues.