The lawsuit will cover every Twitter shareholder who purchased Twitter stock between select dates in 2015.
Twitter has agreed to pay about $809.5 million to settle a shareholder class action, which accused the social media platform of exaggerating its future prospects.
According to TIME, the lawsuit was originally filed by Twitter shareholder Doris Shenwick.
In her suit, Shenwick claimed that Twitter executives misled investors about the company’s growth prospects in November 2014. Then, executives allegedly claimed an increase in monthly active users, from 550 million in the “intermediate term” to more than one billion in the “longer term.”
The lawsuit suggests that, shortly after the shareholder meeting, Twitter discontinued reporting “timeline views.” It then took proactive measures to cover up stagnant user-content engagement, and used vague terms and descriptors to detail on-site activity.
Twitter only acknowledge the truth, says SaltWire.com, after former Chief Executive Office Richard Costolo left the company in June 2015.
Following Costolo’s reveal and Twitter’s admission, the company’s stock prices fell by some 20%.
However, Twitter failed to reach either estimate. Shenwick’s complaint said that Twitter’s figures were only meant to please investors and did not, in fact, have any basis in reality.
Shenwick’s lawsuit was filed in San Francisco in 2016, a year after executives revealed that the platform’s user-base was growing slowly.
TIME notes that, after five years of litigation, the lawsuit came to center around three “allegedly misleading statements made by Twitter executives” on platform growth.
The proposed settlement, says TIME, will allow Twitter to deny all wrongdoing or fault while paying shareholders some $809.5 million recompense.
Despite the offer, Twitter maintains that its executives never lied about the company’s growth prospects, nor did they make any misleading statements. Twitter also claims that poorly-considered statements from some of its top-ranked officials caused its stock values to fall in 2015.
While a trial had initially been set for Monday, it has since been postponed in light of the settlement offer.
SaltWire.com notes that, since 1996, only nine of 5,000-plus securities-related class actions have both gone to trial and reached a jury verdict. Many securities-related lawsuits are dismissed, while most of those which survive are eventually settled.
Twitter, adds MarketWatch.com, plans to pay the $809.5 billion settlement using cash-on-hand; it expects to record a related charge in its third quarter.
The settlement is expected to cover investors who purchased Twitter stock between 6 February 2015 and 28 July 2015.
Twitter shares have since dropped by about 2%, following a broader slump in the U.S. market.
Sources
Twitter Agrees to Pay $809.5 Million Settlement in Shareholder Class Action Lawsuit
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