Applied Digital shares tumble after Wolfpack Research takes short position

(Reuters) -Shares of Applied Digital slumped on Thursday after Wolfpack Research disclosed a short position in the digital infrastructure company and accused it of "an embarrassing and predictable stock promotion."

The stock was down 19.2% at $7.26, after a nearly four-fold jump this year as of last close.

Wolfpack said Applied Digital "pumped up its stock in May by claiming to pivot from a floundering business hosting bitcoin miners, to becoming a low-cost AI cloud service provider."

Reuters could not independently confirm the short-seller's claim.

"We strongly disagree with the conclusions drawn in the report," Applied Digital said in response to the report.

"The company was never contacted by the author of the report, which contains many inaccurate and misleading claims. Over time the business will speak for itself," it said.

The short-seller also took aim at investment bank B Riley Financial, which it had targeted earlier this year, for its "heavy involvement" with Applied Digital.

Insiders at B Riley hold a 48.4% stake in Applied Digital and will exit their position as it becomes clear that the company's claims "make no sense," Wolfpack alleged.

The short-seller said Stability AI, Applied Digital's biggest prospective AI customer, was also "dubious."

Stability AI and B Riley did not immediately respond to Reuters' requests seeking comment.

Dallas, Texas-based Applied Digital is the latest target in a series of short-seller attacks that have shaken corporate America this year.

Earlier, Hindenburg Research launched a scathing attack on Carl Icahn's investment firm Icahn Enterprises and digital payments firm Block. Both the companies have denied Hindenburg's allegations.

(Reporting by Pritam Biswas in Bengaluru; Editing by Maju Samuel)

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