Twitter Is Paying A Staggering Amount To Settle Out Of Court
Twitter really wants this lawsuit to end.
This article is more than 2 years old
Twitter made an 8-K filing in court that makes it very clear they are paying a settlement to handle a lawsuit, but that is in no way an admission of their guilt. This is a fair enough statement. Businesses do this in order to avoid the time and potential money pursuing the legal disagreement would take. However, it’s hard not to look at how much Twitter is paying and be a little shocked. In order to settle a lawsuit that alleges the social media platform misled its investors, Twitter is paying over $809 million in a settlement. Once the court approves the settlement amount, the company intends to pay the full amount with cash on hand during the third quarter of 2021.
According to Variety, Twitter actually has $4.13 billion in cash on hand and short-term investments of $4.48 billion. So paying out of pocket is within the company’s reach.
So why is it that investors feel misled? Presentation of data. When you show facts one way, it can imply an end result that’s misleading to people. Those who are suing Twitter feel that’s what happened when the social media platform shared their user data in a way that made it look like the company was growing in 2015, when investors say it was actually flat or possibly even declining. Twitter shared monthly active user figures with investors. The complaint alleges that the company was internally tracking daily active user figures and chose to hide that information from investors. Those figures allegedly showed a slowdown on the social network, while the monthly figures implied growth. The lawsuit has been ongoing, with the complaint originally filed in 2016. The settlement amount will have to be approved by a judge before it can be finalized.
While Twitter’s engagement may or may not have actually been down in 2015, this year is seeing surprising growth on the platform. A lot of that growth has been due to international users. The Q2 earnings for 2021 show an increase in revenue and user engagement. Twitter’s Monetizable Daily Active User count has increased 11% for year over year. This growth is despite the count for monetized daily active users in the USA actually declining. Some people contribute this to former President Donald Trump. It’s been suggested that some users were only on the platform to check his daily tweets. Since he’s been banned from Twitter, those users aren’t engaged on the platform. This idea has been called the “Trump bump”. However, there’s no evidence to say that’s accurate.
Like other social media platforms, Twitter has been enforcing a lot of new policies over the past year and a half in order to handle the American elections, Covid-19 misinformation, and more. To the outside observer, it often seems as though their users may sometimes be uncomfortable with some of these policy changes, but never as upset as they are when the platform changes something visual, like when they updated their font in 2021.
The company is said to have major growth plans over the next three years specifically, so settling this lawsuit and getting it off their plate now makes sense. It will be interesting to see if Twitter makes any moves to pull in more growth in the United States, or whether the company will continue to focus on growth in international markets.
