AppLovin Corp ( APP ) shares were trading lower Thursday after short seller Muddy Waters issued a critical report on the company. Benzinga has reached out to AppLovin ( APP ) for comment on the Muddy Waters report.

What To Know: Muddy Waters alleged that its e-commerce operations rely heavily on retargeting, provide low incremental value and violate the terms of service of major digital ad platforms.

Muddy Waters stated that approximately 52% of AppLovin's ( APP ) e-commerce conversions come from retargeting, while only 25%-35% of sales are truly incremental. The report also alleged AppLovin ( APP ) extracts proprietary user data from major platforms, including Meta, Google and TikTok, to build artificial user graphs, giving it an unfair advantage in ad auctions.

The short seller further alleged AppLovin's ( APP ) techniques involve persistent identity graphs ("PIGs") to retarget high-value users, making its actions difficult to detect. Additionally, Muddy Waters reported a 23% churn rate among AppLovin's ( APP ) e-commerce beta advertisers, contradicting the company's prior statements of near-zero churn.

If the allegations are accurate, Muddy Waters suggested AppLovin ( APP ) could face the risk of deplatforming, similar to past cases like Cheetah Mobile.

AppLovin ( APP ) has yet to respond to the report.

APP Price Action: Applovin ( APP ) closed Thursday down 20.12% at $261.70, according to Benzinga Pro.

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