As a settlement agreement to resolve a class-action lawsuit, Twitter reported that it will pay $809.5 million to resolve the claims of its plaintiffs.
Investors who filed the lawsuit accused the firm of providing them with false information about user participation.
Lawsuit for millions of dollars to Twitter
According to a report recently published by Variety, the original lawsuit dates back to 2016, the year in which a Twitter shareholder pointed his accusations towards part of Twitter’s board of directors, including its CEO and founder, for concealing data related to the slowdown in Twitter’s user growth.
The investment funds National Elevator Industry Pension Fund and KBC Asset Management NV are plaintiffs in a class action complaint against Twitter, which is being characterized as a securities fraud indictment.
Among the allegations, the indictment claimed that in early 2015, the business was using daily active users (DAU) as a key indicator of user engagement on social media. The failure to contextualize those metrics to its investors, according to the complaint, is part of Twitter’s problem. According to the lawsuit, Twitter’s DAU figures suggested that user interaction growth was stagnating or declining.
Subsequently, in its Q4 2018 earnings report, Twitter introduced the mDAU metric, defined as the average number of “people, organizations or other accounts logged in or authenticated and accessed Twitter on a given day through twitter.com or Twitter apps that can display ads.” With confidence, the strategy was presented to investors in order for this mechanism to better represent its objectives of increasing monetization usage.
Yesterday, when referring publicly to this case in a filing, a Twitter spokesperson stated that this settlement agreement will not “include or constitute an admission, concession or finding of any fault, liability or wrongdoing on the part of the Company or any defendant.” Payment of the agreed-upon figure will materialize once the court approves the proposed settlement.
Twitter has $4.13 billion in cash and short-term investments, as well as $4.48 billion worth of short-term investments, according to the company’s filing with the Securities and Exchange Commission on June 30, 2021.The settlement amount will be paid out with cash on hand, which would be charged to the third quarter of 2021 as a cost.
