A Twitter shareholder is suing the microblogging service, claiming its executives misled investors about growth prospects, resulting in an artifically inflated stock price.
The suit, filed Friday in federal court in San Francisco, claims that former Twitter CEO Dick Costolo and CFO Anthony Noto said during a November 2014 meeting with analysts that they expected the number of monthly active users on the service to grow approximately 20 percent to more than 550 million in the "intermediate term" and more than a billion "over the longer term," as CNET reports.
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In February 2015, Twitter reiterated its strong outlook, emphasizing several new product initiatives designed to drive user growth and engagement, and the following day Twitter's stock price increased nearly 17 percent.
When Twitter released its first quarter 2015 financial results, however, the company reported only a 5 percent increase in monthly active users over the previous period, driving its stock price down, according to the complaint. Twitter currently has 313 million monthly active users.
The complaint, which seeks class-action status, claims the company "lacked a basis" for its growth projections and knew its new products were not, in fact, having a meaningful impact on user growth and engagement.
"As a result of defendants' false statements, Twitter common stock traded at artificially inflated prices," the suit claims. After the previously mentioned revelations came to light, the company stock was "hammered by massive sales, sending Twitter's stock price down 40 percent" causing "economic harm and damages" for shareholders.
Twitter did not immediately respond to PCMag's request for comment.