Twitter seeks to settle 2016 class action lawsuit for US$800 million
Published Monday, September 20, 2021 3:12PM EDT
This April 26, 2017, file photo shows the Twitter app icon on a mobile phone in Philadelphia. (AP Photo/Matt Rourke, File)
Twitter Inc. said on Monday it would pay US$809.5 million to settle a shareholder class action lawsuit accusing the social media company of deceiving investors about how often people used its platform.
The settlement resolved a case that had been on the verge of going to trial. Jury selection had been scheduled to begin on Monday, but at a Sept. 17 hearing U.S. District Judge Jon Tigar in Oakland, California postponed it until late November.
Twitter, former Chief Executive Officer Richard Costolo and former Chief Financial Officer Anthony Noto denied wrongdoing in agreeing to the settlement, which requires Tigar's approval.
"The jury trial is a great equalizer, even for some of the most powerful entities on the planet," said Tor Gronborg, a partner at Robbins Geller Rudman & Dowd representing the shareholders.
In early afternoon trading, Twitter shares were down 3.8 per cent at US$60.11. 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.
Shareholders sued Twitter in September 2016, alleging it artificially inflated its stock price by misleading them about user engagement.
According to the complaint, Twitter discontinued reporting "timeline views" in late 2014, and concealed stagnating or declining user engagement by reporting vague descriptions of user metrics.
Shareholders said Twitter acknowledged the truth after Costolo left the company in June 2015, and its stock price dropped 20 per cent.
The class action covers investors who purchased the stock from Feb. 6, 2015 to July 28, 2015.
Since 1996, only nine of the more than 5,000 U.S. securities class action cases filed by stock investors gone through trial to a verdict, the Securities Class Action Clearinghouse said.
Slightly more than half of the lawsuits are dismissed, and most of the rest settle.
Reporting by Nivedita Balu in Bengaluru; Editing by Saumyadeb Chakrabarty and Marguerita Choy