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Twitter accused of misleading shareholders about user growth projections in lawsuit

Twitter Inc.’s struggle to grow its user base beyond celebrities, marketers, and snarky journalists has been well documented over the last few years. It also shows in the company’s stock price, which was trading at under $20 a share at the market’s close on Friday from almost $70 a share in early 2014. 

Now a shareholder who bought the stock during more optimistic times is accusing the social media company of making “false and misleading” statements about Twitter’s growth projections, and failing to disclose a change in how management tracked engagement, thereby propelling the stock to trade at artificially inflated levels. 

In a proposed class action filed in federal court Friday, Doris Shenwick says she bought shares at some point between February 6, 2015, and July 28, 2015, but was misled about Twitter’s prospects based on statements made by Twitter’s officers and directors in meetings with analysts, SEC filings, and press releases. Specifically, the lawsuit mentions Twitter’s “Analyst Day” back in 2014 when the company introduced new features meant to spur engagement and projected (according to the lawsuit) that Twitter’s active monthly users would reach 550 million in the immediate future and over 1 billion in the long term. The current count is 313 million. The suit also mentions Twitter’s 2014 full-year earnings report in which it reiterated its strong growth outlook, sending shares up nearly 17%. Shares eventually fell later in the year after Twitter lowered its revenue forecast. They have never recovered.  

In the 20-page legal complaint, lawyers for Shenwick assert that Twitter’s actions violate the Securities and Exchange Act of 1934. They are seeking damages and interest to be determined at trial. 

A representative for Twitter did not immediately respond to a request for comment.

CZ