AppLovin stock tumbles after SEC launches investigation into data collection practices, company faces growing scrutiny amid short-seller reports

Shares of AppLovin Corporation (NYSE: APP) tumbled on Monday(October 6) following reports that the US Securities and Exchange Commission (SEC) is investigating the company's data collection practices. The SEC's inquiry centers on whether AppLovin violated agreements related to targeted advertising, according to Bloomberg.

AppLovin Corporation, based in Palo Alto, California, is an American mobile technology company founded in 2012. The company provides developers with tools to market, monetize, analyze, and publish their apps through its platforms, including MAX, AppDiscovery, and SparkLabs.

The investigation reportedly stems from a whistleblower complaint filed earlier this year, along with multiple short-seller reports. However, neither the company nor its officials have been accused of any wrongdoing. An AppLovin spokesperson stated, "As a global public company, we regularly engage with regulators and if we get inquiries we address them in the ordinary course," adding, "Material developments, if any, would be disclosed through the appropriate public channels."


The news caused AppLovin's stock to drop 14 percent in regular trading and an additional 5 percent in after-hours trading. Despite this setback, the company's stock has surged approximately 80 percent this year, building on a more than 700 percent increase in 2024.

This growth has been driven by AppLovin's advancements in artificial intelligence, which have enhanced its ad targeting capabilities. Last month, the company was added to the S&P 500 index, replacing MarketAxess Holdings.

According to the CNBC website, AppLovin has faced criticism from short-sellers, including Fuzzy Panda Research and Muddy Waters Research. In March, Muddy Waters alleged that AppLovin's advertising tactics systematically violate app stores' terms of service by extracting proprietary IDs from platforms like Meta, Snap, TikTok, Reddit, and Google, thereby enabling targeted ads without user consent.

The SEC's investigation adds to the scrutiny AppLovin faces over its data collection and advertising practices. The outcome of this inquiry could have significant implications for the company's operations and stock performance.