Twitter will pay over $800 million t​o settle a class action suit

The 2016 lawsuit claimed executives misled investors about the company's growth.

Stephen Lam / reuters

Twitter has agreed to pay $809.5 million to settle a class action suit filed by shareholders in 2016. Investors alleged that Twitter masked the company's slowing growth while executives including former CEO Dick Costolo and co-founders Evan Williams and Jack Dorsey (the current CEO) sold stock “for hundreds of millions of dollars in insider profits.”

The plaintiffs said Twitter was tracking daily active users (DAU) as the key metric for engagement in early 2015, but it was still reporting monthly active user figures. The DAU measurement indicated engagement was dropping or staying flat, according to the lawsuit.

Twitter says the proposed settlement, which a court has yet to approve, "resolves all claims asserted against Twitter and the other named defendants without any admission, concession or finding of any fault, liability or wrongdoing by the company or any defendant." Twitter and all of the individuals named as defendants in the suit have denied any wrongdoing. The lawsuit accused Twitter and executives of violating the Securities Exchange Act of 1934.

The company plans to use cash on hand for the settlement. It's expected to pay the sum by the end of the year.

In its Q4 2018 earnings report, Twitter started reporting average monetizable daily active users (mDAU). It said that was the only engagement metric it would disclose to investors going forward, partly because it's a more accurate reflection of how it's making money from users.