SAN FRANCISCO (CN) - A class of Twitter investors claims the company misled shareholders about its growth projections just before its stock prices plummeted.
In a federal lawsuit filed in the Northern District of California, lead plaintiff Doris Shenwick said Twitter executives told analysts back in November 2014 that it expected its number of users to increase to over 550 million, and eventually grow to over a billion.
This turned out not to be true, since by early 2015 user growth was flat or declining, according to Shenwick's complaint.
The lawsuit names former CEO Richard Costolo and current chief financial officer Anthony Noto as defendants.
In July 2015, following Costolo's resignation in the previous month, Twitter announced its financial outlook for the third quarter of that year. While it projected quarter revenue of $545 million to $560 million and up to $2.27 billion in revenue for the full year, it also reported that its monthly average users had grown by less than one percent.
The news caused Twitter's stock price to plummet to $31.24 per share on July 29, 2015.
Shenwick claims Twitter executives knew that new product initiatives intended to attract more users were not working, and concealed this from investors by continuing to be falsely optimistic in its press releases and conference calls.
"Plaintiff and the class would not have purchased Twitter common stock at the prices they paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated by defendants' misleading statements," Shenwick says in her complaint.
She seeks to certify a class of shareholders who purchased Twitter stock between Feb. 6, 2015 and July 28, 2015.
Twitter did not respond to an emailed request for comment.
Shenwick is represented by Shawn Williams with the San Francisco firm Robbins Geller Rudman & Dowd.
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