Twitter faces lawsuit from shareholders over unrealistic growth projections

A shareholder has filed a suit against the company in San Francisco's federal court.

Twitter is facing a lawsuit from a shareholder claiming that the social network is responsible for misleading investors regarding its potential for growth, which led to dramatic ups and downs in its stock price.

The suit, which was filed in federal court in San Francisco on Friday, claims that in November 2014 the company and its executives misled shareholders by promising higher monthly active user rates.  Twitter promised an increase in monthly active users to 550 million during the “intermediate” term and said that it would eventually have more than a billion “over the longer term.”

In February 2015, Twitter's stock price increased by 17 per cent in one day as a result of these projected monthly active users rates, along with other positive statements about its potential growth. However, currently the company has only 313 million monthly users and it has reported stagnant user growth for the next quarter. According to the lawsuit, this led to steep declines in Twitter's stock price.   

The social network has been trying for some time now to renew interest in its service, which had previously cornered the market on trendy posts that made news around the world. Lately though consumers have been presented with a number of alternatives including Snapchat and Instagram that allow them to stay in touch with their friends, celebrities and news in a similar way to Twitter. 

Investors have also begun to turn their attention away from the company which has caused its stock price to drop by over 60 per cent since April of 2015. 

Image Credit: Anthony Correia / Shutterstock

ABOUT THE AUTHOR

Anthony currently resides in South Korea where he teaches and experiences Korean technological advances first hand.