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Twitter seeks to settle 2016 class action lawsuit for $800 million
Published Sep 20, 2021 11:04AM ET
Updated Sep 20, 2021 12:21PM ET
© Reuters. FILE PHOTO: A Twitter logo is seen outside the company headquarters in San Francisco, California, U.S., January 11, 2021. REUTERS/Stephen Lam
By Tom Hals and Nivedita Balu
(Reuters) -Twitter Inc said on Monday it would pay $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 (NYSE:TWTR), 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% 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.
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%.
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.
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