US-based microblogging platform, Twitter has agreed to pay $809.5 million to settle a shareholder class-action lawsuit filed in 2016, accusing that the social media company of deceiving investors about how often people used its platform.
Investors alleged that Twitter masked the company’s slowing growth while executives including former CEO Mr. Dick Costolo and co-founders Mr. Evan Williams and Mr. Jack Dorsey (the current CEO) sold stock “for hundreds of millions of dollars in insider profits.”
The plaintiffs said Twitter was tracking daily active users (DAU) as the key metric for engagement in early 2015, but it was still reporting monthly active user figures. The DAU measurement indicated engagement was dropping or staying flat, according to the lawsuit.
The settlement resolved a case that had been on the verge of going to trial. Jury selection had been scheduled to begin on September 20, but at a September 17 hearing, US District Judge Jon Tigar in Oakland, California postponed it until late November.
Twitter and all of the individuals named as defendants in the suit have denied any wrongdoing. The lawsuit accused Twitter and executives of violating the Securities Exchange Act of 1934.
“The jury trial is a great equalizer, even for some of the most powerful entities on the planet,” said Mr. Tor Gronborg, a partner at Robbins Geller Rudman & Dowd representing the shareholders.
Last day, Twitter shares were down 3.8 percent at $60.11. The company said it expects to use cash on hand to pay the settlement amount in the fourth quarter of this year and record a related charge in the third quarter.
In September 2016, Shareholders sued Twitter alleging it artificially inflated its stock price by misleading them about user engagement. According to the complaint, Twitter discontinued reporting “timeline views” in late 2014 and concealed stagnating or declining user engagement by reporting vague descriptions of user metrics.
Shareholders said Twitter acknowledged the truth after Mr. Costolo left the company in June 2015, and its stock price dropped 20 percent. The class action covers investors who purchased the stock from February 6, 2015, to July 28, 2015.
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