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Twitter sued by shareholder over growth projections

Stockholder alleges company had no basis for optimistic statements about expected growth in user base.

Twitter is facing a lawsuit accusing it of misleading investors.

James Martin/CNET

Twitter is being sued by a shareholder who claims the social network misled investors about its prospects for growth, causing wild swings in the company's stock price.

The suit, filed Friday in federal court in San Francisco, alleges Twitter and its executives misled shareholders in November 2014 when they promised an increase in monthly active users to 550 million in the "intermediate" term and more than a billion "over the longer term." Following other positive statements about potential growth in February 2015, the company's stock price climbed 17 percent in one day, the complaint notes (see below).

But Twitter, which has 313 million monthly users, reported flat user growth the next quarter, causing steep declines in its stock price, according to the lawsuit. The company also lacked a basis for them, according to the complaint, which seeks class-action status.

The San Francisco-based social network company has been trying to renew interest in its service, which at one time was the epitome of trendy and up-to-the-minute posts. But consumers now have many options for keeping up with friends, celebrities and the news, from an ever-expansive Facebook to hot alternatives such as Instagram and Snapchat. Investors too are looking elsewhere, shaving more than 60 percent off Twitter's stock value since April 2015.

A Twitter representative declined to comment on the lawsuit.