Twitter In Between A Rock And A Hard Place For Agreeing To Settle The Lawsuit

Agreeing to settle is often an indicator of the fact that the organization accused is at most times guilty of the action that they are accused of. For Twitter, one of the most widely used micro-blogging platform, the class action lawsuit filed by the shareholders over the accusation that Twitter has knowingly defrauded its shareholders by providing not only inaccurate but vague and made up results of the insights of the activity occurring on the platform.

This caused the share price to fluctuate and certain shareholders to benefit while others had to face losses. The class action lawsuit was about to go to trial with jury selection earlier starting on 17th September but delayed to late November by the judge. US District Judge Jon Tigar postponed the selection due to certain issues and is yet to approve of the approximate $810 million dollars settlement reached between the clients and the plaintiffs.

Superseding the settlement announcement, Twitter CEO, Richard Costolo and CFO, Anthony Noto, publicly denied any illegal and underhand action taken by the company to defraud the shareholders. While on the other hand, shareholders were of the opinion that Twitter accepted their fault when Costolo had resigned from the company back in 2015, which had caused the stock to fall by 20% backing up their claim of fraudulent activity.

However, this begs the question of why the company agreed to settle and use its resources to settle with the amount as huge as $810 million dollars in one of the most difficult fiscal years. The quarterly reports of social media companies along with Twitter ,even though, shows significant progress from past years but still indicate a decline over the course of the decade as the result of the pandemic.

Taking that into consideration, the 2016 Lawsuit was backed by the shareholders as Twitter had discontinued the timeline views providing insight back in 2014 and while the shareholders were entitled to know whether there was an increase or decrease in the user base. Twitter used vague descriptions across the board to hide constant and falling users on their platform artificially inflating their stock price by false reports.

However, the settlement was expected as from amongst 5000 class action lawsuits filed in the United States only 9 have gone to trial and verdict while the rest were dismissed or settled. This lawsuit filed back in 2016 consists of users that purchased the stock from early February of 2015 to late July of the same year.

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