Twitter Securities Class Action
The popular social networking platform Twitter was recently named in a securities class action lawsuit. For more information, visit Battea’s Twitter case summary.
The suit alleges that Twitter made false or misleading statements about its ongoing business and prospects, and failed to disclose a number of facts about its operations. Specifically, one of the issues is that Twitter switched to measuring engagement through daily active users rather than timeline views in early 2014. Further, user engagement growth hadn’t accelerated or had actually slowed down, and a slew of new products hadn’t yet resulted in more active users or engagement.
The suit also claims Twitter’s “acceleration” came because active monthly user growth was of a low quality, and that the social network didn’t have a basis to project that the user base would grow 20 percent or meet a goal of 550 million users in the “intermediate” future. The suit was filed in federal court in San Francisco and has a class period of Feb. 6, 2015 to July 28, 2015.
What happened?
The original projections were made in late 2014, and in fact Twitter projected it would surpass 1 billion users in the longer term, according to Gizmodo. However, Twitter only had about 313 million monthly active users through the end of June 2016, making it one of the less-trafficked major social platforms.
Nearly two years on from those initial projections, Twitter hasn’t come close to those numbers, prompting the lawsuit, Bloomberg further reported. As a means of dealing with flattening user base growth, Twitter recently worked out a deal to live-stream a number of NFL games on the platform as they read tweets about the games.
At the heart of the lawsuit, then, is the fact that when those projections were first made, the enthusiasm they generated among investors caused the company’s stock price to rise 17 percent, according to Seeking Alpha. But around the same time, Twitter stopped using timeline views to measure engagement, and within six months the company reported user growth was coming in lower than expected, with the first game having drawn an estimated 2.1 million viewers through the social network. More recently, Twitter has also tried to generate new interest among social media users by changing the way it counts characters, so that users have more room to work with per tweet before reaching the famous 140-character limit.
The effect on investors
It should be noted that Twitter’s stock price is down considerably from the level it saw in 2014. According to Google Finance, the stock’s all-time high was observed at the start of 2014, when it traded at an even $69 per share. By the end of that November, though, it was down to less than $42 per share, and continued to fall throughout the remainder of the 2014 calendar year. The following April, it had risen to north of $51 per share once again, but since then the decline has been long, slow and steady. Twitter’s stock price closed 2015 at a little more than $23 per share.
Currently, Twitter is trading at $18.63 per share, near something of a mid-point between its high and low values for 2016. In mid-June, the stock reached its ebb for the year at a little more than $14 per share, down from the high observed at the start of the year of $22.56. For most of the time since, the company’s price per share has hovered in the mid-to-high teens.
For more information on this case or other class action litigations, please contact Kevin Doyle, Senior Vice President, at 203-987-4949 or info@battea.com.