- Twitter said Monday it has agreed to settle a consolidated class-action lawsuit for $809.5 million.
- The lawsuit alleged Twitter misled investors about the level of engagement by users on the social media site.
- Twitter plans to take a third-quarter charge for the settlement that still needs court approval.
Twitter has agreed to pay more than $800 million to settle a class-action securities lawsuit over allegations it misled investors about the level of engagement by users on the social media site.
The binding agreement to pay $809.5 million will need final approval from the United States District Court for the Northern District of California, the company said in a filing with the Securities and Exchange Commission. A trial over the allegations was set to begin on Monday in Oakland, California, but District Judge Jon Tigar on Friday reportedly postponed the proceedings until late November.
The original lawsuit filed by a Twitter shareholder in 2016 accused Jack Dorsey, Twitter's co-founder, and others including former CEO Dick Costolo of concealing facts about the site's slowing user growth while they sold their personal stock holdings "for hundreds of millions of dollars in insider profits," Variety reported.
Reuters reported the complaint said Twitter discontinued reporting "timeline views" in late 2014 and concealed user engagement that was stagnating or declining by reporting vague descriptions of user metrics.
Robbins Geller Rudman & Dowd, a law firm in San Diego representing shareholders, said plaintiffs KBC Asset Management NV and National Elevator Industry Pension Fund sought to recover their investment losses and the losses of shareholders involved in the class-action lawsuit who purchased Twitter's stock between February 6, 2015, and July 28, 2015.
Twitter said the settlement resolves all claims without admitting any fault, liability, or wrongdoing by the company or any defendant. "Twitter and the individual defendants continue to deny any wrongdoing or any other improper actions," it said in a press release filed with the SEC.
Twitter said would take a third-quarter charge for the settlement and plans to pay it by using paid cash on hand. The company ended the second quarter with about $8.61 billion in cash, cash equivalents, and marketable securities. The company aims to pay the settlement in the fourth quarter.
Shares of Twitter fell by 2% during Monday's session, with the broader US equity market sliding on worries about a potential collapse of a major property developer, Evergrande, in China.