AppLovin Corporation ( APP ) shares are trading higher friday as the stock appears to be reversing after initially dropping 20% earlier in the week following a short-seller report from Muddy Waters.

What To Know: Muddy Waters alleged that AppLovin’s e-commerce operations rely heavily on retargeting, with more than half of its conversions coming from this practice. The report claimed that only 25%-35% of AppLovin’s sales are truly incremental, challenging the company’s growth narrative. It also accused AppLovin ( APP ) of extracting user data from major platforms like Meta, Google and TikTok to build artificial user graphs, potentially violating platform terms of service.

The report further alleged that AppLovin ( APP ) uses persistent identity graphs to retarget high-value users, making detection difficult. Muddy Waters cited a 23% churn rate among AppLovin’s e-commerce beta advertisers, which contradicts the company's previous statements of near-zero churn. The short seller warned that AppLovin ( APP ) could face the risk of deplatforming, similar to past cases such as Cheetah Mobile.

AppLovin ( APP ) has not yet responded to the allegations.

APP Price Action: AppLovin ( APP ) shares were up 4.31% at $272.96 at the time of writing, according to Benzinga Pro.

Read Next:

Consumer Inflation Expectations Skyrocket In March, Hit Highest Levels In 32 Years

Image via Shutterstock.