Twitter offers to pay $809.5m to settle class action lawsuit which accused it of allegedly deceiving investors over user engagement
Twitter has reportedly said on Monday it would pay $809.5 million to settle a shareholder class action lawsuit.
The lawsuit, which was filed back in September 2016, accused the microblogging platform of deceiving investors about how many people used the service.
The decision to settle avoids the case going to trial, Reuters reported, with jury selection slated to begin on Monday.
Last week at a 17 September hearing, US District Judge Jon Tigar in Oakland, California postponed the court case until late November.
Under the terms of Monday’s proposed settlement, Twitter denies any wrongdoing or other improper action.
“The proposed settlement resolves all claims asserted against Twitter and the other named defendants without any admission, concession or finding of any fault, liability or wrongdoing by the Company or any defendant,” said the platform. “Twitter and the individual defendants continue to deny any wrongdoing or any other improper actions.”
The individual defendants were former Twitter CEO Dick Costolo and former CFO Anthony Noto who deny wrongdoing in agreeing to the settlement.
The final settlement agreement is subject to court approval.
“The jury trial is a great equaliser, even for some of the most powerful entities on the planet,” Tor Gronborg, a partner at Robbins Geller Rudman & Dowd representing the shareholders was quoted by Reuters as saying.
In early afternoon trading, Twitter shares were reportedly down 3.8 percent at $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.
So what was behind Twitter’s current management deciding it was better to settle the lawsuit over alleged wrongdoing under its previous management team?
Well unhappy Twitter shareholders in September 2016 sued Twitter, accusing the platform and its management team of violations of the Securities Exchange Act of 1934.
Essentially they alleged Twitter artificially inflated its stock price by misleading them about user engagement.
The complaint pointed to a 2014 investor event that Twitter held with financial analysts where it allegedly provided “unrealistic” growth projections that called for its monthly active users (MAU) “to double to over 550 million users and for revenue to grow by $4.6 billion by 2018.”