Last month, AppLovin (APP 1. 78%) was punished by investors more for what it didn't do than for what it actually did.
A hoped-for graduation to a top stock index was one of the non-occurrences, while a short-seller felt compelled to write a scathing report on the company.
In some respects, AppLovin was fortunate that its stock didn't decline more deeply than the sub-11% dip it experienced across June.
Coming up short The index let-down, such as it was, occurred near the top of the month.
Every quarter, S&P Dow Jones Indices, the operator of the closely ed S&P 500 index (among many others), s to "rebalance" the index, replacing component stocks deemed no longer suitable with new ones.
Image source: Getty Images. Several days ahead of the current rebalancing, speculation grew which companies would land on the hallowed index.
AppLovin was mentioned as one of those candidates, at least by a team of analysts at heavyweight lender Bank of America.
The leading spect, in their take, was online securities brokerage Robinhood, but it also mentioned six other spects. Among these was AppLovin.
Alas, S&P Dow Jones Indices performed what felt a head fake, electing not to change the composition of the S&P 500 index at all this time.
The market can usually shrug off a non-event this, disappointing as it may be initially.
It's tougher to ignore a highly critical and detailed analysis of a stock, such as the ones typically published by institutional short-sellers.
Unfortunately for AppLovin, that's exactly what happened when such a firm trained its sights on the company.
In mid-June, the firm, Culper Re, unveiled a rather sprawling 30-page screed criticizing AppLovin's practices.
Many of its accusations pertained to AppLovin's goal of acquiring the non-Chinese operations of controversial social media app TikTok, a service that has fallen afoul of the U. Government.
In the report, Culper intimated that a significant AppLovin holder, Hao Tang, is an individual with a shady past and "extensive direct and indirect ties" to certain dark corners of the Chinese government.
It decried this "covert Chinese ownership," and warned of the danger posed to U. National security. Radio silence AppLovin hasn't made any official statement on the Culper Re allegations.
Perhaps, management feels they'll blow over with investors before long.
Personally, I'd view that as a mistake since troubling allegations the ones the short-seller raises have a way of lingering and, in turn, negatively affecting investor morale.
We'll see whether the company can der news encouraging enough to dislodge the numerous accusations from the collective investor memory. Bank of America is an advertising partner of Motley Fool Money.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AppLovin and Bank of America. The Motley Fool has a disclosure policy.