Twitter Inc. 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 suit, originally filed by Twitter shareholder Doris Shenwick, claimed executives misled investors over the company’s growth prospects in November 2014, promising an increase in monthly active users to 550 million in the “intermediate” term and more than a billion in the “longer term.” The company failed to deliver on either estimate and concealed that it had no basis for those projections, according to the complaint.
The suit was filed in federal court in San Francisco in 2016, the year after the company’s stock took a nose dive after executives revealed the platform’s sluggish growth. After five years of litigation, the case had come down to three allegedly misleading statements made by Twitter executives concerning the growth of the platform. A trial set for Monday was postponed Friday ahead of the settlement.
The proposed settlement concludes without any admission of fault or wrongdoing by Twitter, according to a statement by the company on Monday. In its defense, Twitter had denied that its executives lied or knowingly made misleading statements. It also rejected the idea that statements by former chief financial officer Anthony Noto and former chief executive officer Dick Costolo caused the stock price to fall.
Twitter didn’t immediately respond to a voicemail seeking comment on the agreement.
Under the pact, Twitter intends to use cash on hand to pay the settlement amount in the fourth quarter and expects to record a charge for the settlement during the third quarter of 2021.
The case is In re Twitter Inc. Securities Litigation, 16-cv-05314, U.S. District Court, Northern District of California (San Francisco).
–With assistance from Erik Larson and Chris Dolmetsch.
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