Short Seller Says AppLovin Is 'Desperate And Doomed,' Shares Slide

Applovin Corp APP is in the crosshairs of short sellers again.

What To Know: Culper Research issued a short report on AppLovin on Thursday, alleging the advertising technology company poses national security risks because of its potential ties to China.

The short seller noted that CEO Adam Foroughi has repeatedly denied that the company has any meaningful Chinese ownership or operational ties to China. Despite the repeated denials from Foroughi, Culper believes AppLovin has been backed by Chinese national Hao Tang since at least 2017.

The report states that Tang controlled up to 28% of AppLovin Class A shares before the company’s IPO in 2021, and currently controls at least 9.8%.

“Further, our research reveals Hao Tang's numerous ties to the CCP, money laundering, illegal gambling, and human trafficking operations,” the short seller said.

Benzinga has reached out to AppLovin for comment on the report.

Culper Research issued an initial short report on AppLovin in February. Since then, the company announced plans to try to merge with TikTok’s ex-China business. Culper also alleged that the company formed two agency agreements with Chinese AdTech companies BlueFocus Intelligence and eClickTech to expand cross-border e-commerce operations in China. Those agreements have not been disclosed to U.S. investors, according to the short seller.

“AppLovin's covert Chinese ownership and operations raise not only concerns for shareholders, but for national security and data security – the very concerns AppLovin purports to address by acquiring TikTok's ex-China operations. We suspect AppLovin's pursuit of TikTok represents the Company's final ‘Hail Mary’ attempt to alchemize its stock promotion into something lasting. It's desperate, and doomed,” Culper said in the report.

Culper is not the only short-selling firm to target AppLovin. Muddy Waters previously alleged that AppLovin is “another scammy adtech company” that relies on retargeting for e-commerce conversions. Fuzzy Panda Research also accused the company of stealing data from Meta Platforms earlier this year.

Despite being targeted by several short sellers, AppLovin shares are up more than 400% over the past year. The company beat analyst estimates on the top and bottom lines when it reported first-quarter results last month as advertising revenue jumped 71% year-over-year. AppLovin guided for second-quarter advertising revenue in the range of $1.20 billion to $1.22 billion.

APP Price Action: AppLovin shares were down 2.04% at $375.61 at the time of publication Thursday, according to Benzinga Pro.

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