Robbins Geller Helps Score a Win in Twitter Securities Case

October 16, 2017

In an order dated October 16, 2017, the Honorable Jon S. Tigar of the United States District Court for the Northern District of California denied in part defendants’ motion to dismiss in Shenwick v. Twitter, Inc.

Twitter is a global social media platform for public self-expression and conversation in real time, where any user can create a Tweet and follow other users. Filed in September 16, 2016, the case charges Twitter and its former CEO Dick Costolo and current CFO and COO, Anthony Noto, with violations of the Securities Exchange Act of 1934. The case alleges that Twitter and its executives misled investors by failing to disclose the company’s performance metrics being switched from focusing on the social network’s monthly active users (MAU) to its daily active users (DAU), resulting in artificially inflated stock prices. Plaintiffs reference specific statements made in press releases and filings with the SEC, and statements made to the media, securities analysts and investors, such as when Noto concealed DAU and deceived analysts in February 2015 that Twitter’s user engagement was improving when in reality user engagement was declining.   

“When you make a point to conceal this information, you do it intentionally,” said Robbins Geller partner Daniel Drosman, one of the lead lawyers in the action. 

“Plaintiff’s strongest argument is that Twitter misled investors by failing to disclose DAU metrics during the class period,” stated the court, denying Twitter’s motion to dismiss based on the omission of DAU metrics. “Plaintiff claims that Twitter should have disclosed these adverse DAU and user engagement trends because those trends would have allowed investors to understand that Twitter’s statements about MAU acceleration were unrealistic,” the court added. “Plaintiff has plausibly alleged, through statements by Defendants, the CWs, and analysts, that MAU is unhelpful at best and misleading at worst in the absence of companion DAU data.”

Given plaintiffs’ allegations, the Court concluded that “it would be ‘absurd’ for Noto and Costolo not to have been aware of adverse DAU trends during the class period, or to have misunderstood the interaction between DAU and MAU.”

Serving as additional counsel, Robbins Geller attorneys Daniel S. Drosman and Susannah R. Conn are litigating this case on behalf of the plaintiffs, with the assistance of Robbins Geller forensic accountant Terry Koebl.

Shenwick v. Twitter, Inc., No. 3:16-cv-05314-JST (N.D. Cal. Oct. 16, 2017).

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