Twitter said on Monday it would pay $809.5 million (roughly Rs. 5,960 crores) 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 September 17 hearing US 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 equaliser, 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 percent at $60.11 (roughly Rs. 4,420). 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 percent.
The class action covers investors who purchased the stock from February 6, 2015 to July 28, 2015.
Since 1996, only nine of the more than 5,000 US 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.
© Thomson Reuters 2021