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Investing.com -- AppLovin’s (NASDAQ: NASDAQ:APP) CEO, Adam Foroughi, has defended the company amid allegations made in two short reports. The reports, which led to a 20% drop in the company’s shares, were criticized by Foroughi as being filled with inaccuracies and false claims. He stated that these reports were designed to undermine the company’s success and manipulate its stock price for the short-sellers’ financial gain.
Foroughi addressed several key issues in his letter to shareholders, partners, and his team. He emphasized the company’s compliance with App Store policies, stating that all games they promote are also apps published in the App Store and must adhere to its policies. He reiterated the company’s commitment to transparency and integrity, stating that their business model is both legitimate and profitable for their partners.
Regarding consumer experience, Foroughi explained that the company’s revenue is earned based on the value they drive, not merely on clicks or impressions. He stressed that their advertisements aim to generate real engagement and revenue for their advertisers, and every download results from an explicit user choice.
Foroughi also addressed the company’s data practices, stating that they do not track children’s data and their terms and policies explicitly prohibit such actions. The CEO also dismissed claims of financial and accounting improprieties as factually incorrect and baseless. He stated that the company is audited by a big-four accounting firm and has never received a modified opinion in its history.
Foroughi also highlighted the success of their e-commerce pilot, stating that it reached a run rate of roughly $1 billion a year of gross advertiser spend in the e-commerce category alone from around 600 customers. He sees substantial growth potential in the coming years.
The CEO’s defense comes after the company’s shares fell by over 20% following two short reports by Fuzzy Panda Research and Culper Research. The reports accused the mobile ad-tech company of engaging in deceptive practices, such as "Ad Fraud" and potentially illegal activities, including data theft from Meta Platforms Inc (NASDAQ:META) and violations of app store policies set by Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOGL). The reports suggested that AppLovin’s high click-through rates (CTRs) and revenue growth might be attributed to these unethical tactics, rather than legitimate business practices.
The researchers claimed to have found evidence of AppLovin’s involvement in a "Direct Download" program, which they believe could allow the company to install apps on consumers’ phones without consent. Such practices could attract significant fines from regulatory bodies like the FTC and could lead to AppLovin’s SDKs being banned from both the Apple iOS and Google Play stores.
Despite the allegations, shares of AppLovin have recovered slightly and are currently down 10%.
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