Twitter Inc. has agreed to pay $ 809.5 million to settle a shareholder class action lawsuit that accused the social media company of painting an overly rosy picture of its future.
The lawsuit, originally filed by Twitter shareholder Doris Shenwick, claimed executives misled investors about the company’s growth prospects in November 2014, promising an increase in the number of active users monthly to 550 million to “the intermediary” and to more than one billion to “longer term”. . “The company did not provide any of these estimates and concealed that it had no basis for these projections, according to the complaint.
The lawsuit was filed in federal court in San Francisco in 2016, the year after the company’s shares plunged after executives revealed the platform’s slow growth. After five years of litigation, the case had boiled down to three allegedly misleading statements made by Twitter executives regarding the platform’s growth. A trial scheduled for Monday was postponed Friday before the settlement.
The proposed settlement ends without any admission of fault or wrongdoing on Twitter’s part, according to a company statement on Monday. In its defense, Twitter had denied that its executives were lying or knowingly making misleading statements. He also rejected the idea that statements by former CFO Anthony Noto and former CEO Dick Costolo caused the share price to drop.
Twitter did not immediately respond to a voicemail requesting comment on the deal.
Under the pact, Twitter intends to use available cash to pay the settlement amount in the fourth quarter and expects to record a charge for the settlement in the third quarter of 2021.
The case is In re Twitter Inc. Securities Litigation, 16-cv-05314, US District Court, Northern District of California (San Francisco).
–With help from Erik Larson and Chris Dolmetsch.
Photo: Signage at Twitter headquarters in San Francisco, Calif., Monday, July 19, 2021. Photo credit: David Paul Morris / Bloomberg.
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