Key Takeaways

  • AppLovin's market capitalization collapsed by over 90 percent after its IPO, falling from roughly $28 billion to $3.8 billion during a broader tech market downturn.
  • While public investors dumped the stock, AppLovin's underlying business was generating around $1 billion in real cash flow, and top-line revenue continued to climb.
  • CEO Adam Foroughi and co-founder Rafael Vivas used that $1 billion cash stream to buy back cheap shares aggressively, taking on debt to maximize purchases.
  • The leadership team prepared to take the company private, studying Michael Dell's playbook as a plan if public markets refused to revalue the business.
  • That buyback program generated an estimated $50 billion windfall once the market acknowledged the company's underlying fundamentals.

The Divergence Between Stock Price and Cash Flow

Most founders panic when their public valuation sinks. AppLovin debuted near a $28 billion valuation before market conditions hammered tech equities, driving the company down to about $3.8 billion. That drop erased over nine-tenths of the firm's paper value.

Yet inside the office, the spreadsheets showed the exact opposite story. Customers were still spending, operational numbers stayed tight, and revenue kept expanding. The business generated roughly $1 billion in annual cash flow. As Rafael Vivas put it: “The company's crashing. It's funny, it's like it's inverse, right? Stock is crashing, revenue's going up.”

Public markets often trade on macro sentiment, liquidity drains, and sector panic rather than individual unit economics. If you run a company that depends on external capital to survive the quarter, a 90 percent stock drop is a death sentence. If your business throws off ten figures of free cash, that drop is simply an extreme discount on your own equity.

Buying Your Own Equity Instead of Explaining It

Vivas and Foroughi realized they had two choices. They could spend their calendar years on investor roadshows pleading for an earnings multiple expansion, or they could exploit the market's blind spot. They chose the latter.

“We don't care about the short term,” Vivas explained. “If we feel like we're doing the right things for our business and growing, ultimately the stock price will reflect that.” Because daily market swings stopped bothering them, their conviction held firm. “Being cut by 20% or being cut by half is just like another day in the NFL for us. It doesn't faze us.”

Host David Senra pointed out the financial logic: “If no one else is going to buy our stock, let's take this billion cash flow, start buying back our stock, and then at one point the company reaps like a 50 billion dollar windfall on that decision.”

AppLovin did not just nibble at the edges of their share count. They took on debt to fund massive buybacks at the trough. If the price kept dropping, they had an endgame ready. “We were thinking if the stock continues dropping, we're just going to buy the company and take it private, kind of like Michael Dell did with his own company,” Vivas noted. Instead of letting public market irrationality dictate operations, they used public liquidity against itself.

What to Do With This

Calculate your company's survival metric without external capital. If your valuation dropped 80 percent tomorrow, determine whether your cash flow covers your payroll. If it does not, cut your non-revenue-generating burn this quarter so you answer to your customer metrics instead of external market sentiment.