For advertising technology stock AppLovin (NASDAQ: APP), short reports—critical research notes published by an investor who is betting the stock will fall—have become a noteworthy theme. Critical reports from Fuzzy Panda Research and Culper Research were released early in 2025, leading AppLovin shares to fall over 12% on Feb. 26, 2025. On Mar. 27, a month later, research firm Muddy Waters issued another report, leading AppLovin shares to tank over 20%.
Depsite so many reports in recent months, markets and Wall Street analysts alike have generally swept these concerns under the rug. AppLovin rose approximately 108% in 2025, with the company delivering multiple strong earnings reports that drove shares higher. Additionally, AppLovin price targets now come in as high as $860, massively above targets in the $450 range from early 2025.
AppLovin now faces another sell-off at the beginning of 2026, due to a short report from CapitalWatch that led AppLovin shares to fall almost 6% on Jan. 21. However, shares recovered some of those losses in subsequent sessions. While markets often react swiftly to headline-driven short reports regardless of their ultimate merit, the initial price movement has raised questions about how investors should evaluate the claims and what context may be missing from the broader narrative.
Let’s break down what short sellers are alleging and gain an updated outlook on AppLovin.
CapitalWatch Claims APP Involvement in Money Laundering Scheme
CapitalWatch has made serious accusations against AppLovin, alleging that two of AppLovin’s largest shareholders are using the company’s business to launder money.
AppLovin acts as an auctioneer for companies looking to buy and sell advertising space, taking a fee after facilitating the deal.
For example, one company might pay $1,000 to advertise. After AppLovin takes a percentage, like 25%, the company offering advertising space receives $750.
CapitalWatch claims that these two shareholders control a network of companies on both sides of these transactions, with AppLovin in the middle. The report also alleges they are laundering money from illegal activities by pushing the funds through AppLovin.
AppLovin Categorically Denies CapitalWatch Claims
AppLovin responded to CapitalWatch’s report in emailed statements to various media outlets, stating that the report is “rife with false, misleading, and nonsensical allegations,” calling claims that it facilitated money laundering “patently false.” The company said the short-seller report misunderstands both its business model and its compliance practices, and has sent CapitalWatch a cease-and-desist letter, stating the company’s claims are “conspiratorial.”
While CapitalWatch’s report made many associations aimed at linking AppLovin’s business to a vast crime network in Asia, the report lacks primary evidence to substantiate its most serious allegations. CapitalWatch did not provide documents, contracts, invoices, or bank records that clearly show money moving between allegedly illicit companies and AppLovin.
It is important to note that companies releasing short reports can have a vested interest in seeing AppLovin shares decline. By taking short positions in the stock and then releasing a damaging report, they can profit as markets sell off, creating an inherent incentive to publish negative research. AppLovin saw sharp downward moves after short reports in 2025, showing that the ability to generate significant gains through this strategy is real.
Bloomberg reported back in October of last year that the SEC is investigating AppLovin, but the SEC has not officially confirmed this or accused AppLovin of any wrongdoing. The alleged investigation was not centered around money laundering claims but on AppLovin’s data collection practices and whether the company violated agreements with app store operators like Apple (NASDAQ: AAPL). Since Bloomberg’s initial reporting, there have been no public updates or enforcement actions related to this matter.
Analysts Eye Big Gains Despite Accusations Against APP
AppLovin faces notable regulatory, reputational, and legal risks. Still, short-seller reports have so far failed to translate into confirmed regulatory action or sustained investor concern. Further developments in regulatory investigations, as well as a class action litigation involving AppLovin, will be key risk factors to watch going forward.
AppLovin shares hit a 52-week closing high near $734 on Dec. 22. As of the Jan. 27 close, shares have fallen to around $544, marking a steep 26% decline.
Wall Street analysts see considerable upside in shares amid this drop. Analysts at Needham and Company issued a $700 price target on Jan. 26, several days after the CapitalWatch report. The consensus price target on AppLovin sits at around $706, implying 30% upside.
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
The article "AppLovin Faces Money-Laundering Claims—Here’s What’s Missing" first appeared on MarketBeat.
