According to a report recently published by Variety, the original lawsuit dates back to 2016, when a Twitter shareholder targeted Twitter’s board of directors, including its CEO and founder, for concealing data related to Twitter’s slowing user growth.
The class action lawsuit against Twitter, which is categorised as an allegation of securities fraud, has as its main plaintiffs the investment funds National Elevator Industry Pension Fund and KBC Asset Management NV, both of which are represented by major law firms.
Among its main points, the indictment noted that the company was counting daily active users (DAU) as the main index of user engagement on the social network in early 2015. The problem lies in Twitter’s failure to contextualise those metrics to its investors at the time. According to the lawsuit, Twitter’s DAU figures showed that user engagement growth was flat or declining.
Subsequently, in its Q4 2018 earnings report, Twitter introduced the mDAU metric, defined as the average number of “people, organisations or other accounts logged in or authenticated and accessed Twitter on a given day through twitter.com or Twitter apps that can display ads”. The formula was presented to investors with the confidence that this mechanism better reflects its goals of driving monetisation usage.
Yesterday, speaking publicly about the case in a filing, a Twitter spokeswoman stated that this settlement agreement “shall not include or constitute an admission, concession or finding of any fault, liability or wrongdoing on the part of the Company or any defendant”. Payment of the agreed amount will materialise once the court approves the proposed settlement.
As of 30 June 2021, Twitter has $4.13 billion in cash and cash equivalents, as well as short-term investments of $4.48 billion. The company said the settlement amount will be paid with cash on hand, which would be accounted for as a charge in the company’s third quarter 2021 financial statements.