Twitter (TWTR), the social media behemoth, has agreed to pay $809.5 million to resolve a shareholder class-action lawsuit launched in 2016.
What’s the lawsuit?
Twitter allegedly deceived investors about its user engagement numbers, according to the plaintiffs. Individuals mentioned in the lawsuit, as well as Twitter, denied any misconduct.
According to the original lawsuit, which was filed in 2016 in the United States District Court for the Northern District of California, Twitter violated Sections 10(b) and 20(a) of the Securities Exchange Act by knowingly misleading investors about some of its metrics, which “caused the price of Twitter common stock to be artificially inflated during the Class Period.”
Between February 6 and July 28, 2015, a class-action lawsuit was filed on behalf of all people who bought or otherwise acquired Twitter common shares.
The binding settlement agreement “resolves all claims made against the company and the other listed defendants without any admission, concession, or finding of any blame, responsibility, or wrongdoing by the Company or any defendant,” according to a statement released by Twitter today.
The corporation stated that it plans to pay the proposed settlement with cash on hand, which is still subject to court approval. Twitter intends to charge for it in the third quarter of 2021.
Twitter stated, “The business expects to use cash on hand to pay the settlement amount,” most likely this quarter. In its third-quarter report, the San Francisco firm plans to record a charge for the settlement. The agreement must be approved by the court.
Twitter Stock down
On a widely negative trading day in the stock market, Twitter shares recently traded at $59.97, down 4%, outperforming the Nasdaq Composite’s 2.6 percent loss.
Over the last three months, Twitter’s stock has lost 1% of its value. Twitter’s fair value, according to Morningstar analyst Ali Mogharabi, is $58. In July, he was ecstatic with Twitter’s second-quarter financial report.
He stated, “Twitter announced fantastic second-quarter earnings that surpassed our expectations.”
“Impressive top-line growth was driven by user growth, increased demand for brand advertising as a result of the current economic recovery, and the firm’s product upgrades and new capabilities, which attracted more direct response advertisers.
“We raised our forecasts because we anticipate that such a diverse range of ad solutions would increase Twitter’s ad customers and spending.”
According to Mogharabi, brand advertising currently accounts for almost 85% of Twitter’s overall ad income. However, “we remain optimistic that the company will be able to achieve a more balanced mix of brand and direct response ad revenue.”