Fuzzy Panda, a prominent short-seller firm, has launched serious allegations against mobile advertising company AppLovin, accusing it of engaging in fraudulent practices to elevate its online advertising business. The firm sent a letter to the S&P 500 Index Committee, urging them to exclude AppLovin's stock from the benchmark index. Fuzzy Panda's claims are based on extensive research, including interviews with former employees of AppLovin and Meta, industry experts, and ad-tech executives, coupled with their own analysis and technology testing.
In its report, Fuzzy Panda accused AppLovin of violating key app store policies of tech giants Google and Apple. The firm alleged that AppLovin engaged in data theft from Meta during its e-commerce expansion and unlawfully tracked children's devices, breaching both Apple and Google's regulations. However, these allegations have not been independently verified by CNBC.
Fuzzy Panda has developed a reputation for taking on high-profile companies, having previously targeted firms such as electric car makers Fisker and Lucid, insurer Globe Life, and online education company Stride. The firm holds a short position in AppLovin, indicating it stands to profit if the company's stock price declines further. This strategy mirrors Fuzzy Panda's earlier success with Globe Life, which saw its stock plummet more than 50% following the firm's revelations of insurance fraud.
"AppLovin's recent revenue growth has been based in data theft, revenue fraud, and the exploitation of our country's laws protecting children." – Fuzzy Panda
AppLovin CEO Adam Foroughi strongly refuted the allegations, describing them as inaccurate and misleading. He emphasized that these claims aim to undermine AppLovin's success and drive down its stock price for the financial gain of short-sellers. According to Foroughi, AppLovin's advancements in artificial intelligence have enhanced advertising for their partners.
"It's disappointing that a few nefarious short-sellers are making false and misleading claims aimed at undermining our success, and driving down our stock price for their own financial gain, rather than acknowledging the sophisticated AI models our team has built to enhance advertising for our partners." – Adam Foroughi, AppLovin CEO
Industry analysts have also weighed in on the matter. BTIG analysts expressed skepticism regarding the merit of the issues raised by Fuzzy Panda. Piper analysts highlighted that AppLovin's clientele consists of highly sophisticated digital advertisers who would likely detect any fraudulent activities through their rigorous attribution and incrementality testing.
"We believe most of the issues that have been highlighted recently have almost no merit." – BTIG analysts
"APP's customers are the most sophisticated in digital advertising & we believe any alleged fraudulent practice would be felt immediately via their own attribution or incrementality testing." – Piper analysts
Fuzzy Panda's letter to the S&P 500 Index Committee argues that AppLovin does not meet the "gold standard" required for inclusion in the prestigious index. The firm warns that AppLovin's actions could result in a permanent ban from major app store platforms that dominate more than 99% of the market.
"AppLovin has been playing a dangerous game and is risking a permanent ban from the duopoly mobile app store platforms that controls the gateway to >99% of the market." – Fuzzy Panda
AppLovin has countered these claims, noting the timing of the short reports coincided with their earnings report period, limiting their ability to respond with financial data.
"It's also noteworthy that the short reports emerged after our earnings report, where we would be in a period of being unable to respond with financial performance." – Adam Foroughi, AppLovin CEO