Twitter Falls 4% on Agreeing to Pay $809.5 Million to Settle Shareholder Claims By Investing.com
By Dhirendra Tripathi
Investing.com – Twitter stock (NYSE:) fell nearly 4% Monday as the social platform agreed to pay $809.5 million to settle a five-year-old case that alleged its officials misled investors in painting a rosier picture about the company.
The original lawsuit, filed by shareholder Doris Shenwick, alleged Chief Executive Officer Jack Dorsey, former CEO Dick Costolo and board member Evan Williams hid facts about Twitter’s slowing user growth while they sold their personal stock holdings.
According to Bloomberg, the suit 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 it had no basis for those projections, according to the complaint.
The complaint also alleged the company was tracking daily active users as a lead indicator of user engagement by early 2015 but didn’t reveal that to investors at the time, choosing to report monthly active user figures. The lawsuit claims that the DAU data revealed that the company’s user engagement was declining or flat.
According to the company, it plans to use the cash available to cover the settlement amount. This is likely to occur in the next quarter.
The company said the settlement doesn’t mean admission of any wrongdoing. It stated that there is no guarantee that the final settlement will be reached or approved by the court.
With approximately $8.61 million in cash and cash equivalents as well as marketable securities, the company ended its second quarter.
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