App Stock Goes Down After SEC Comments: Details

AppLovin (NASDAQ: APP) shares tumbled more than 14% on Monday following a Bloomberg report that the U.S. Securities and Exchange Commission (SEC) is investigating the company’s data-collection practices. 

The probe allegedly centers on whether AppLovin violated agreements related to targeted advertising and user data handling.

Key Takeaways

• AppLovin stock fell 14% in regular trading and an additional 5% after hours.
• The SEC investigation reportedly follows a whistleblower complaint and short-seller reports.
• AppLovin denies wrongdoing and says it regularly cooperates with regulators.

What Triggered the Selloff

The decline began shortly after Bloomberg published that the SEC has been probing AppLovin’s data practices, particularly its handling of targeted advertising data. 

The agency’s inquiry reportedly stems from a whistleblower complaint filed earlier this year, accompanied by several short-seller reports accusing the company of unethical practices.

Although the report stated that neither the company nor its executives have been accused of wrongdoing, the news was enough to shake investor confidence. The timing was especially sensitive, arriving just before market close, which amplified the volatility.

AppLovin’s stock dropped to as low as $95.76, wiping out billions in market value within hours.

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Company Response

In a statement, an AppLovin spokesperson said the firm does not comment on the “existence or non-existence” of regulatory matters. 

They emphasized that as a global public company, AppLovin regularly engages with regulators and will disclose any material developments through proper channels.

The company’s response suggests a measured approach aimed at calming markets without directly confirming or denying the investigation’s existence. 

This aligns with how many large-cap tech firms handle early-stage regulatory probes, which often take months before official confirmation.

The Role of Short Sellers

The news follows a series of short-seller attacks that have targeted AppLovin throughout the year. Research groups like Fuzzy Panda Research, Culper Research, and Muddy Waters have all published reports accusing the company of manipulating ad data.

Muddy Waters alleged that AppLovin’s advertising software systematically violates app store policies by extracting proprietary IDs from platforms such as Meta, Snap, TikTok, Reddit, and Google. 

These IDs are allegedly used to push targeted ads without user consent, a claim the company has strongly denied.

Earlier, in February, Fuzzy Panda and Culper Research released similar reports criticizing AppLovin’s AXON software, which they claimed improperly tracks users to boost ad performance. Those reports sent the stock down over 12% at the time.

Market Reaction and Stock Performance

AppLovin’s shares have been among the most volatile in the tech sector this year. Despite the recent drop, the stock had soared nearly 700% in 2024 and another 80% year-to-date in 2025. 

That growth was largely driven by investor enthusiasm for AppLovin’s AI-powered ad optimization engine, which has been praised for improving targeting efficiency.

The SEC news, however, triggered a swift reversal in sentiment. Investors began taking profits amid fears that any regulatory penalties or restrictions could affect the company’s ability to monetize user data — the foundation of its business model.

AppLovin’s stock ended the day down over 14% at $95.76 and slipped another 5% in extended trading.

SEC’s Focus on Data Privacy

The SEC’s interest reflects the broader regulatory tightening around data privacy and digital advertising. Over the past two years, both the SEC and FTC have increased scrutiny of how tech firms collect, store, and use consumer data.

If the probe confirms that AppLovin mishandled or misrepresented data usage, it could lead to penalties, class-action lawsuits, or limitations on its advertising products. 

While no formal charges have been filed, the uncertainty surrounding the investigation could continue to weigh on investor confidence in the near term.

AppLovin’s Recent Success and Challenges

AppLovin has been one of the standout stories in tech. Its AI-driven AXON ad platform has transformed how developers optimize campaigns, leading to explosive revenue growth and profitability improvement.

The company was recently added to the S&P 500, replacing MarketAxess Holdings, signaling its arrival as a major player in the U.S. equity market. That inclusion helped fuel institutional interest, adding momentum to its earlier gains.

However, the same growth that drew investors also invited scrutiny. Critics argue that the company’s technology may rely too heavily on user data collection practices that could fall into legal gray areas under evolving privacy standards.

What Analysts Are Saying

Analysts remain divided on the impact of the SEC investigation. Some view it as a temporary overreaction, while others warn it could be the start of deeper compliance issues.

Optimists argue that AppLovin’s fundamentals remain strong and that its technology leadership in the mobile ad space is unlikely to be disrupted by a preliminary inquiry. Pessimists, on the other hand, point to the company’s history with short-seller reports and believe heightened regulation could cap its future margins.

If the SEC probe expands, analysts expect AppLovin to face higher compliance costs and increased volatility in its share price.

Final Thoughts

AppLovin’s rapid rise has made it one of the most watched stocks in the tech sector. The SEC’s reported probe introduces new uncertainty, but it does not yet indicate wrongdoing. Investors should monitor official statements from both the SEC and the company in the coming weeks.

In the short term, volatility is likely to remain high. For long-term investors, the key question is whether AppLovin can continue to scale its AI-driven ad technology while maintaining full regulatory compliance.

The company’s future depends on balancing innovation with transparency — a challenge that could define the next chapter of its growth story.

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FAQs

Why did AppLovin stock drop?

AppLovin shares fell after reports that the SEC is investigating its data-collection practices related to targeted advertising.

Has AppLovin confirmed the SEC probe?

No. AppLovin stated it does not comment on regulatory matters but said it engages with regulators regularly.

Who are the short sellers targeting AppLovin?

Notable short-seller firms include Muddy Waters, Fuzzy Panda Research, and Culper Research, all of which have criticized AppLovin’s data practices.

Is AppLovin still in the S&P 500?

Yes, AppLovin was recently added to the S&P 500, replacing MarketAxess Holdings.

Should investors buy the dip?

Buying now depends on risk tolerance. While the fundamentals remain strong, regulatory uncertainty could cause further volatility in the short term.