Key Takeaways

  • AppLovin went public in 2021 at a $28 billion valuation, hit a $40 billion peak, and then fell 92% to $3.8 billion in 2022 despite producing $1 billion in EBITDA.
  • CEO Adam Foroughi cut off all Wall Street investor meetings during the crash, concluding that pitching funds who were dumping tech shares was a waste of executive time.
  • The company directed its free cash flow into an aggressive capital return program, buying back $6 billion of its own stock and retiring 20% to 25% of all shares outstanding.
  • AppLovin protected employee morale during the drawdown by issuing performance stock awards across key engineers and operators, not just executive officers.
  • The share price rebounded from $9 to $750 over 30 months, taking the business from its $3.8 billion bottom to a $250 billion market cap.

When Cash Flow and Share Price Split

In 2021, AppLovin entered the public markets at a $28 billion valuation with $600 million in EBITDA. The market cap quickly climbed to $40 billion. Then the 2022 tech correction arrived, and public equity managers rushed for the exits.

“The stock went down literally every day,” Foroughi recalled. “We got to about a $3.8 billion market cap.”

AppLovin was generating $1 billion in EBITDA that year, but the public markets treated it like an insolvent business. When private valuations or public multiples collapse across an entire sector, macro selling often blinds funds to actual company performance. Many founders respond to this kind of price drop by booking roadshows, hiring investor relations consultants, and begging institutions to see the math.

Foroughi did the opposite. He stopped talking to public investors entirely.

Becoming Your Own Best Investor

“I'm not going to talk to investors at all anymore,” Foroughi said. “They're not buying our stock. It's a waste of time. But guess what? We generated a ton of cash. Let's start buying our own stock. Let's become our best investor.”

Instead of burning hours trying to persuade fund managers, AppLovin aimed its cash directly at the open market. The company launched a massive share repurchase program. Over the following two years, AppLovin bought back $6 billion of its own stock, wiping out between 20% and 25% of its total share base.

When a profitable business trades at four times EBITDA, buying back your own shares is the highest-return investment available. Every share retired permanently concentrates the remaining equity for long-term holders. When the business continued to grow, the supply crunch sent the stock from $9 to $750, ultimately reaching a $250 billion valuation.

Surviving the Morale Death Spiral

A 92% drop usually destroys an engineering team. Stock options sit underwater, resumes hit recruiters' desks, and key contributors leave for cash-heavy incumbents.

To stop the bleed, AppLovin rallied its staff around an adversarial posture. “We built it by just saying, 'Look, it's an us against the world mentality,'” Foroughi explained. “Everyone's turned against us, we're going to buy back shares, and we implemented a performance stock plan which typically goes to CEOs, but we did it across key people in the company.”

By distributing performance-based equity directly to key operators across Palo Alto, Beijing, and Singapore, AppLovin tied staff compensation directly to the stock's eventual recovery. When the market price corrected upward, those grants paid out generational returns to the technical team that stayed.

What to Do With This

Look at your cap table and cash position this week. If you run a profitable company whose valuation has been slashed by market conditions, stop spending your time courting outside investors who do not value your unit economics. Calculate what percentage of your shares you can retire using trailing twelve-month profits, design a retention grant plan for your top five engineers tied to profitability milestones, and buy out your most pessimistic shareholders directly.