Image source: sec.gov
Twitter Inc disclosed a binding agreement to settle a consolidated class-action lawsuit, under which the social media company will pay $809.5 million to resolve claims it provided misleading information to investors.
The settlement announced Monday stems from a lawsuit filed in September 2016 by a Twitter shareholder that accused company executives, including CEO Jack Dorsey, of artificially inflating its stock price by misleading investors about how often people used the site.
According to the complaint, Twitter said in 2014 that it expected its monthly average user base to increase significantly to “to over 550 million" in the intermediate term and “over a billion" over the longer term. The site’s user growth, however, remained flat, causing steep declines in its stock price, the lawsuit said.
By April 2019, Twitter stopped reporting monthly active users — which, at last count, was around 330 million — and now only reports daily user figures.
In an 8-K filing with the US Securities and Exchange Commission (SEC) on Monday, the San Francisco-based company said the proposed settlement — which still must be approved by a judge — resolves all claims against Twitter without the company admitting any wrongdoing.
Twitter 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.
Reuters noted that the case had been on the verge of going to trial, with jury selection had been set for this week, but that a judge had postponed the trial last week until late November.
Tor Gronborg, a partner at Robbins Geller Rudman & Dowd, representing the shareholders, told the outlet, “The jury trial is a great equalizer, even for some of the most powerful entities on the planet.”
Source: Equities News