Twitter pays $809.5 million to resolve lawsuit
Twitter pays $809.5 million to resolve lawsuit

Twitter has proposed an $809.5 million settlement of a 2016 class-action lawsuit alleging that the company misled investors about user interaction numbers.

According to a press release, the lawsuit alleged a violation of the Securities Act of 1934. The company said it plans to use available cash to pay a potential settlement amount in the fourth quarter.

The lawsuit alleges that the company gave investors misleading information about its growth indicators to make its financial position appear more correct than it actually is.

The complaint cited an event the company hosted with financial analysts in 2014 in which the company made an unrealistic growth forecast that would double the number of monthly active users to 5.5 by 2018 and increase the number of monthly active users to $4.6 billion.

Additionally, the complaint alleges that the company attempted to hide user interactions from investors. User interaction has been identified as the main reason for the increase in the number of monthly active users.

The complaint stated that investors would know that if the defendant provided investors with complete and accurate information about user interactions, the growth in the number of monthly active users and the company's ability to increase revenue would slow.

Twitter hopes to reach an agreement with investors

Additionally, in 2014, the company stopped publishing a timeline view of key user interaction metrics. This makes it difficult for analysts and investors to track the company's growth.

When a user visits Twitter and updates their timeline to see or find more tweets, the timeline view is saved. The company said at the time that the index had become irrelevant.

Instead, it began to include indicators of "poor quality of growth". This includes sending automatic messages to inactive users encouraging them to sign in so the company can treat them as active users.

These indicators caught the attention of the US Securities and Exchange Commission. Twitter asked in April 2015 if it plans to provide alternative metrics. This should explain the trend towards user engagement and advertising services.

According to a report later in the Wall Street Journal. The company announced to the US Securities and Exchange Commission that it has begun disclosing how often users have responded to ads. And how much advertisers paid for that information.

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