On Monday, AppLovin Corp (NASDAQ: APP) experienced a significant uptick in its stock price following the public retraction and apology from research firm CapitalWatch, which had previously published contentious claims implicating one of AppLovin's major shareholders. This development arrives shortly before the company is scheduled to release its latest quarterly earnings report.
CapitalWatch's report had, in its initial publication last month, made allegations asserting direct connections between AppLovin shareholder Hao Tang and several entities and individuals purportedly involved in criminal activities. These connections included names such as Chen Zhi, Prince Group, Jin Bei Group, Tang Jun, and Yang Zhihui. However, on Sunday, CapitalWatch issued an apology on X (formerly Twitter), acknowledging that these associations were inaccurate and fell short of the publication standards the firm upholds.
The short seller elaborated that it had mistakenly linked a judicial decision from the Court of Bordeaux to Mr. Tang. Recognizing the error, CapitalWatch removed all content related to the shareholder in question and retracted the statements to prevent misinformation and protect the legal rights of all parties implicated.
Two weeks prior to the retraction, AppLovin had formally requested CapitalWatch to withdraw the report, characterizing the allegations as "defamatory and baseless" in a cease-and-desist communication.
Initially, CapitalWatch had defended its investigation and report, citing a six-month inquiry supported by documentation and multiple sources as the basis of its claims. Nonetheless, AppLovin's Chief Executive Officer, Adam Foroughi, has consistently refuted these allegations. He stated in the previous year that certain short sellers are propagating false and misleading accusations with the intent to undermine AppLovin's success and negatively affect its stock price for their financial benefit.
Meanwhile, the investor community and analysts have shown continued confidence in AppLovin’s prospects. Needham recently upgraded its rating from hold to buy with a price target of $700, and Evercore ISI Group began coverage with an outperform rating set at $835. Morgan Stanley upheld an overweight rating and raised its price target from $750 to $800, whereas Wells Fargo maintained an overweight stance with a target increase from $721 to $735. Jefferies also sustained a buy rating and increased its target from $800 to $860, showcasing a trend of favorable analyst sentiment toward the company's stock.
At the time of publication, AppLovin shares reflected a substantial gain of 14.55%, trading near $465.90. This surge highlights the pronounced market reaction to the corrected report amid the anticipation for the upcoming earnings announcement.
The revised investor outlook and recent analysis indicate that market participants remain optimistic about AppLovin’s trajectory, despite the earlier turbulence caused by the erroneous report. This episode underscores the sensitivity of stock performance to public disclosures and the importance of accuracy in investment research.