Cheetah Mobile Inc. (NYSE: CMCM) has once again denied accusations of ad fraud, causing its stock to soar in a rebound. The company refuted one of the major mistakes made by the accusers, which involved whether Cheetah Mobile had control over the software development kits (SDKs) it uses on its site.
After the denial, shares of Cheetah Mobile rebounded more than 21 percent in New York, closing at $6.64 per share on Wednesday. The stock jumped another 3 percent during after-hours trading following the release of the company's third press release this week, which provided additional evidence to support their claims of innocence.
Cheetah Mobile stated, "Upon analyzing the videos and other evidence, the company discovered that Kochava's testing methods contained fundamental mistakes, leading to a number of false or misleading conclusions."
According to the press release, one of the main mistakes highlighted is whether Cheetah Mobile has control over the SDKs they use. The company clarified that 97% of their overseas utility revenue comes from third-party advertising SDKs, contradicting Kochava's claim that most of the SDKs involved in the click fraud were developed by Cheetah Mobile itself. Cheetah Mobile emphasized that any wrong calculations made by these external SDKs are unrelated to their own apps.
In addition to vehemently denying the accusations, Cheetah Mobile announced plans to take legal action against Kochava for providing false information about their advertising system to the media, which caused a crash in Cheetah's stock price.
Kochava, an app analytics company, alleged that Cheetah Mobile and an associated company called Kika Tech committed advertising fraud by falsely taking credit for downloads through "click injection" in eight apps on the Google Play store. According to BuzzFeed News, Kochava's study concluded that these eight apps, with a total of over 2 billion downloads, exploited user permissions as part of an ad fraud scheme that could have resulted in the theft of millions of dollars.
As a result of these allegations, Cheetah Mobile's stock value plummeted by 33 percent on Tuesday, closing at $5.48 per share, a decrease of $2.68 on the day.
In response to the unusual stock performance, the Rosen Law Firm has initiated an investigation into securities claims against Cheetah Mobile on behalf of its shareholders.