Yes. It is actually happening. A Twitter shareholder has filed a lawsuit against the social networking platform, claiming that it misled investors with growth projections that have failed to come to pass.
Doris Shenwick, a shareholder in the popular social networking platform, filed a lawsuit against Twitter in the California Northern District Court, in the San Diego county on the 16th. In his lawsuit, Shenwick claims that in November 2014, Twitter promised its investors that the size of its active monthly user base (MAUs) would increase to 550 million in the intermediate term.
He also goes on to state that the company also made promises that its MAU would be able to reach around one billion in the longer term. Unfortunately, none of these milestones have been reached yet and Twitter has merely 313 million users as of now.
This has apparently been cause enough to file a lawsuit for Shenwick. It his also his intention to file a class-action suit representing the people who purchased Twitter stock between February 6, 2015 and July 28, 2015. A class action suit, in case you are unaware of it, seeks to represent multiple people, who have been directly involved with the case.
While Twitter may have been at fault for being overly optimistic, it was also the investor’s duty to independently verify the claims before putting in any money. Twitter should have had less than 300 million MAUs around the time when Shenwick claims it beguiled investors. As an investor, he should not have relied solely upon the company’s claims of reaching 500 million and 1 billion users.
After all, you can not expect a company to be able to reach its projections all the time. And while seeking investments, companies do have a tendency to be a little over optimistic. Meanwhile, Twitter has been making some serious efforts towards making its platform more popular in recent years, partnering up with the NFL to live stream matches, linking arms with Amazon’s Alexa, to name just a few examples.
However, the company is probably not going to jump to 500 million users in the next couple of months. And an investor suing it may only serve to undermine faith and makes things even harder for the platform. Meanwhile, we will have to wait to hear the Jury’s take on the matter.
The case is Doris Shenwick v. Twitter Inc., 16-cv-05314, U.S. District Court, Northern District of California (San Francisco), if you are interested in following it further.