Shenwick v. Twitter, Inc. (282 F. Supp. 3d 1115, 2017)

Citations

282 F. Supp. 3d 1115

Full opinion text

JON S. TIGAR, United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

Twitter is a social media company that, like other social media companies, depends on advertising revenue. Accordingly, how many users Twitter has, and whether those users are engaged with Twitter's content, are deeply important to its success as a company. In their complaint, Plaintiffs allege that Twitter executives knowingly made inaccurate public statements regarding these metrics, and failed to disclose internal information about them, resulting in an inflated share price that fell when the truth about user engagement became known.

Defendants now move to dismiss Plaintiffs' complaint. ECF No. 91. The Court concludes that Plaintiffs' claims are, for the most part, adequately pleaded. The Court will grant the motion in part and deny it in part.

I. REQUESTS FOR JUDICIAL NOTICE

The Court first addresses Defendants' requests for judicial notice. ECF Nos. 92, 106. "As a general rule, [the Court] may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." United States v. Corinthian Colleges, 655 F.3d 984, 998-99 (9th Cir. 2011) (internal quotation marks and citations omitted). However, "[t]he [C]ourt may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). The Court "must take judicial notice if a party requests it and the court is supplied with the necessary information." Fed. R. Evid. 201(c).

Alternatively, under the incorporation by reference doctrine, a court may "take into account documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached [to] the [plaintiff's] pleading." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (quoting In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999) ). The Court may consider the entire document, even if only portions were quoted or referenced in the Complaint. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 569, n. 13, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citing Fed. R. Evid. 201 ) (holding that courts are "entitled to take notice of the full contents of the published articles referenced in the complaint, from which the truncated quotations were drawn.").

A. First Request for Judicial Notice-ECF No. 92

First, Defendants request that the Court take judicial notice of the following documents, which Plaintiff references in her Complaint: (1) Twitter's Registration Statement, ECF No. 92-1; (2) Twitter's Form 10-Q for Q4 2014, ECF No. 92-4; (3) Twitter's Form 10-Q for Q1 2015, ECF No. 92-5; (4) a transcript of Twitter's October 27, 2014 Earnings Call for Q3 2014, ECF No. 92-6; (5) a transcript of Twitter's February 5, 2015 Earnings Call for Q4 2014, ECF No. 92-7; (6) a transcript of Twitter's April 28, 2015 Earnings Call for Q1 2015, ECF No. 92-8; (7) a transcript of Twitter's July 28, 2015 Earnings Call for Q2 2015, ECF No. 92-9; (8) PowerPoint slides presented by Twitter at its "Analyst Day" investor conference on November 12, 2014, ECF No. 92-10; (9) Nick Bilton, Twitter is Betting Everything on Jack Dorsey, VANITY FAIR (June 1, 2016), ECF No. 92-13; (10) a letter from Twitter to the SEC's division of Corporation Finance, ECF No. 92-15; (11) Zachary Edward, How a Small Change by Apple Cost Twitter Millions of Users, QUARTZ (February 5, 2015), ECF No. 92-16; (12) Jim Edwards, Twitter's user growth problem may be worse than you think, BUSINESS INSIDER (February 6, 2015), ECF No. 92-17; and (13) Lara O'Reilly, Twitter admits 8.5% of its users are bots, MARKETING WEEK (August 12, 2014), ECF No. 92-18. ECF No. 92 at 2-5.

The set of documents listed above are referenced in the Complaint and Plaintiff does not question their authenticity. ECF No. 96 at 2, 5. Thus, they are properly subject to judicial notice. Id. at 5. However, because the facts contained in the documents are subject to reasonable dispute, "the Court takes judicial notice only of the statements contained therein, but not for the purpose of determining the truth of those statements." Shaev v. Baker, No. 16-CV-05541-JST, 2017 WL 1735573, at *7 (N.D. Cal. May 4, 2017) (quoting In re LDK Solar Sec. Litig., 584 F.Supp.2d 1230, 1254 (N.D. Cal. 2008). Accordingly, the Court takes judicial notice of ECF Nos. 92-1, 92-4, 92-5, 92-6, 92-7, 92-8, 92-9, 92-10, 92-13, 92-15, 92-16, 92-17, and 92-18.

Second, Defendants request judicial notice of the following SEC filings and media reports that were not referenced in the Complaint: (1) Twitter's Form 10-Q for Q2 2014, ECF No. 92-2; (2) Exhibit C, Twitter's Form 10-Q for Q3 2014, ECF No. 92-3 (3) Jillian D'Onfro, Twitters Admits 5% Of Its 'Users' Are Fake, BUSINESS INSIDER (October 3, 2013), ECF No. 92-11; and (4) Todd Spangler, Twitter's Spam Headache: More than 10 Mil Accounts Might Be Bogus, VARIETY (October 4, 2013), ECF No. 92-12. ECF No. 92 at 2-4.

Both the SEC filings and the news articles are judicially noticeable to show what was available to the market. See Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1064 n. 7 (9th Cir. 2008) (holding that the district court properly took judicial notice of publicly available financial documents and SEC filings); Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 960 (9th Cir. 2009) (internal quotation marks omitted) (holding that courts "may take judicial notice of publications introduced to indicate what was in the public realm at the time, not whether the contents of those articles were in fact true"). The Court therefore takes judicial notice of ECF Nos. 92-2, 92-3, 92-11, and 92-12, without determining the truth of the statements therein.

Third, Defendants request that the Court take judicial notice of Defendant Noto's Form 4. ECF No. 92-14. Plaintiff opposes this request. ECF No. 92 at 8. The Court acknowledges that it has taken judicial notice of SEC Forms 4 on more than one occasion. Curry v. Yelp Inc., No. 14-CV-03547-JST, 2015 WL 1849037, at *4 (N.D. Cal. Apr. 21, 2015) ; Sec. & Exch. Comm'n v. Bardman, 216 F.Supp.3d 1041, 1058 (N.D. Cal. 2016). In both cases, however, the request for judicial notice was unopposed. Moreover, in most cases where courts have taken judicial notice of Forms 4, the plaintiff had alleged insider trading by the defendant, or claimed that financial motive established scienter. E.g., City of Royal Oak Ret. Sys. v. Juniper Networks, Inc., 880 F.Supp.2d 1045, 1059 (N.D. Cal. 2012) (taking judicial notice of Forms 4 because "plaintiffs' scienter and insider trading allegations do rely expressly on [defendants'] stock sales"); Morgan v. AXT, Inc., No. C 04-4362 MJJ, 2005 WL 2347125, at *12 (N.D. Cal. Sept. 23, 2005) (taking judicial notice of the defendant's Forms 4 after the plaintiff referenced his stock sales in the complaint); Wietschner v. Monterey Pasta Co., 294 F.Supp.2d 1102, 1109 (N.D. Cal. 2003) (taking judicial notice of Forms 4 because they were "integral to the stock sale allegations made in the Complaint"); but see Westley v. Oclaro, Inc., 897 F.Supp.2d 902, 928 (N.D. Cal. 2012) (taking judicial notice of Forms 4 even through "the SAC does not rely on insider trading allegations to demonstrate scienter"). Where plaintiffs have not raised the issue of stock sales in the complaint, some courts have declined to take judicial notice of Forms 4. E.g., In re Adaptive Broadband Sec. Litig., No. C 01-1092 SC, 2002 WL 989478, at *20 (N.D. Cal. Apr. 2, 2002) ; Maiman v. Talbott, No. SACV090012AGANX, 2010 WL 11421950, at *7 (C.D. Cal. Aug. 9, 2010) (joining courts that decline to take judicial notice of Forms 4). Therefore, it is noteworthy that here, Plaintiff did not discuss stock sales in the Complaint, and she did not argue that Defendants' financial motives establish scienter. Moreover, the fact of the stock purchases is only relevant insofar as the Court draws the inference that the purchases negate scienter. Although the Court may "compare competing explanations and inferences," those inferences still must "arise from the facts alleged in the complaint." In re MRV Commc'ns, Inc. Derivative Litig., No. CV 08-03800 GAF RCX, 2010 WL 5313442, at *4 (C.D. Cal. Dec. 27, 2010) (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). The Complaint mentions no stock sales of any kind. For all these reasons, the Court will not take judicial notice of Defendant Noto's Forms 4.

B. Second Request for Judicial Notice-ECF No. 106

Defendants filed a second request for judicial notice in connection with their reply in support of the motion to dismiss. ECF No. 106. The documents identified in the request are: (1) Twitter's Form 10-Q for Q1 2014, ECF No. 106-1; (2) Twitter's Form 10-Q for Q2 2015, ECF No. 106-2; (3) Twitter's Form 10-Q for Q3 2015, ECF No. 106-3; (4) Twitter's Form 10-Q for Q1 2016, ECF No. 106-4; (5), Twitter's Form 10-Q for Q2 2016, ECF No. 106-5; (6) Twitter's Form 10-Q for Q3 2016, ECF No. 106-6; (7) a transcript of Twitter's July 29, 2014 Earnings Call for Q2 2014, ECF No. 106-7; (8) a transcript of Twitter's October 27, 2015 Earnings Call for Q3 2015, ECF No. 106-8; (9) a transcript of Twitter's statements at a March 3, 2015 investor conference hosted by Morgan Stanley, ECF No. 106-9; (10) a transcript of a November 6, 2013 speech given by then SEC Chairperson May Jo White, ECF No. 106-10; (11) Facebook Inc.'s 2014 Form 10-K, ECF No. 106-11; (12) Facebook Inc.'s Form 10-Q for Q1 2015, ECF No. 106-11; and (13) Snap Inc.'s Form 10-Q for Q1 2017, ECF No. 106-13. Three of these documents, ECF Nos. 106-7, 106-9, 106-10, are referenced in the Complaint. ECF No. 106 at 3-4.

Like the SEC filings that were the subject of Twitter's first request for judicial notice, the documents listed above are noticeable either under the incorporation by reference doctrine, or because SEC filings are public documents. Metzler Inv., 540 F.3d at 1064 n. 7 (holding that the district court properly took judicial notice of publicly available financial documents and SEC filings). The Court grants the request.

II. INTRODUCTION

This is a securities class action on behalf of all persons who purchased or otherwise acquired Twitter common stock between February 6, 2015 and July 28, 2015, inclusive (the "Class Period"), against Twitter and certain of its officers and/or directors for violations of §§ 10 and 20(a) of the Securities Exchange Act of 1934 (the "Act"). ECF No. 1 ("Compl.") ¶ 2. Generally, Plaintiff Doris Shenwick ("Plaintiff") alleges that "Twitter and certain of its officers and/or directors [ ] made materially false and misleading statements during the Class Period in press releases and filings with the SEC and in oral statements to the media, securities analysts and investors." Id.

Defendant Twitter ("Twitter," or "the Company") is a "global social media platform." Id. ¶ 13. Defendant Costolo served as Chief Executive Officer ("CEO") of Twitter during the Class Period until his resignation on July 1, 2015. Id. ¶ 14. Defendant Noto served as Chief Financial Officer ("CFO") of Twitter during the class period. Id. ¶ 15. Both Costolo and Noto were "control persons" within the meaning of the Act.

A. Twitter's Metrics

Twitter uses three principal metrics to measure "its financial health and growth prospects": (1) "monthly active users or "MAU" (the number of users on the platform in a given month)," (2) "those users' daily activity (user engagement)," and (3) "advertising engagements (the ability of the Company to turn user activity into advertising revenue)." Id. ¶ 20. These three metrics are highly "interrelated." Id. ¶ 21. First, "[i]nformation about Twitter's user engagement is essential to understanding its MAU growth prospects." Id. ¶ 22. "As new users become harder to find and MAU growth slows, user engagement helps increase user retention and reduce [user attrition] which has a direct impact on MAU growth." Id. Put another way, "[s]tagnant DAU growth will eventually cause MAU growth to stall." Id. Second, user engagement drives advertising engagements: "[t]he more often users are on the platform to view advertisements (the more engaged users are), the higher Twitter's advertising revenues." E.g., id. ¶ 23. Twitter acknowledged this connection in its SEC filings. Id. ¶ 85(g) ("User growth trends reflected in the number of MAUs [and] user engagement trends...are key factors that affect our revenue.")

This interplay means that "neither MAU nor user engagement provides a complete picture of the business" without the other. Id. ¶ 24. For example, Twitter "could have millions of users sign up (i.e., high MAU) but if those users logged in to the platform only once a month (i.e., low engagement), the business would suffer because fewer ads can be sold." Id. Twitter confirmed this connection in its 2013 Registration Statement, explaining that "[t]o the extent our user growth rate slows, our success will become increasingly dependent on our ability to increase levels of user engagement." Id. Former Twitter employees serving as confidential witnesses ("CWs") likewise described the low utility of MAU, particularly in predicting advertising revenue, absent accompanying data on user engagement. Id. ¶ 75 (CW-9 ) ("MAU

says nothing about frequency" of use and therefore does not provide "sufficient detail to measure an advertising opportunity."); Id. ¶ 76 (CW-10) (" 'MAU was a terrible metric' and there is no way you could 'judge the health of the company using MAU alone.' "). Tech analysts also expressed reservations about relying on MAU as a meaningful predictor without additional information about user engagement. For example, Jan Dawson, chief analyst and founder of the tech research firm Jackdaw explained MAU's drawbacks:

Monthly usage metrics [MAUs] indicate very little about true engagement on a platform, because using an app every 30 days isn't that much different from never using it at all. For social and communication apps, the key is daily usage because it tells you how people are really engaging.

Id. ¶ 121 (internal alterations omitted). Finally, "Twitter's direct peers consistently reported both total users and user engagement." Id. ¶ 121 (listing Facebook, LinkedIn, Snapchat, Instagram, and others).

B. Pre-Class Period Activity

Until the beginning of the Class Period, Twitter measured user engagement using "timeline views," which were a "proxy for the amount of content [Twitter's] users consume." Id. ¶¶ 20, 36. In mid-2014, Twitter reported a "trend of declining timeline views," which it claimed was driven by "changes" to Twitter's platform that "allow[ed] users to more efficiently access [Twitter's] content." Id. ¶ 26 (2Q 2014 Earnings Call, 3Q 2014 Earnings Call). Twitter told investors that "the same product improvements that had resulted in fewer timeline views ultimately would lead to more satisfied users, which in turn would lead to higher user engagement and MAU growth." Id. In other words, Twitter "reassured investors" that there was nothing to worry about in terms of user growth and engagement. Id. New users, Noto claimed in 2014, were "just as engaged" as existing users. Id. ¶ 27 (Q1 2014 Earnings Call).

In November 2014, "Defendants held an all-day pep rally with analysts ('Analyst Day') to promote their vision to reinvigorate Twitter's user growth." Id. ¶ 3. At Analyst Day, Noto and Costolo announced that Twitter would double its users (from 284 million MAU to 550 million MAU) in the intermediate term and reach over a billion users in the longer term. Id. ¶ 29. To achieve this MAU goal, Twitter planned to " "build an engaging experience...to have those users be engaged [and] stay engaged." Id. ¶ 30. Specifically, Twitter committed to the "operational goal of building the world's largest daily audience" by "increasing engagement and improving retention." Id. ¶ 31. The Company's DAU to MAU ratio was described as one of its "major growth drivers," and Twitter tied a projected $500 million in revenue growth to a 3% increase in the ratio in its top 20 markets-from 48% to 51%. Id. ¶¶ 39, 85(j). Twitter's stock price rose 6% in response to these statements at Analyst Day. Id. ¶ 32.

After Analyst Day, Costolo repeated the importance of user engagement to investors and analysts, even more so than MAU:

[Q:] Should people still focus on monthly active users? Is that what you look at on the inside, is that the number-one metric you want to drive growth on?

[A:] Our number-one priority is to strengthen the core and make Twitter an increasingly daily use case for the people who come to Twitter....

Id. ¶ 33 (February 5, 2015 Business Insider Interview with Costolo). The content of analysts' reporting on Twitter's Analyst Day demonstrated that they got the message. One summarized as follows: "TWTR set some ambitious goals as it aims to have the largest DAU in [the] world with over $14 billion of annual revenue." Id. ¶ 39.

Within the company, the way Twitter measured user engagement was DAU. For example, "CW-1 reported that DAU was the primary engagement metric that Twitter tracked internally after Timeline Views were no longer being reported." Id. ¶ 67. CW-2 claimed that DAU "was talked about on a daily basis by Twitter employees." Id. ¶ 68; see also id. ¶ 71 ("[T]he most important metrics to Twitter were MAU and DAU, which were monitored closely by Twitter's management."). In sum, as Defendants later acknowledged, "[t]he best way to quantify the impact of engagement...was...DAU to MAU." Id. ¶ 85(b).

C. Class Period Activity

Despite a heavy internal focus on DAU and the Company's publicly stated goal of increasing daily use, Twitter did not "tell investors that DAU was its primary user engagement metric" or "provide meaningful updates on user engagement trends, in particular DAU." Id. ¶ 40. Instead, throughout the Class Period, Twitter kept its user engagement statements positive but vague, and highlighted MAU growth.

On February 5, 2015, Twitter filed a Form 8-K with the SEC containing a press release announcing the Company's fourth quarter and fiscal year 2014 financial results, and held an Earnings Call to explain the quarterly results. Id. ¶ 79. Costolo acknowledged lower than expected MAU growth at the end of 2014, but described signs of a rebound in early 2015:

We ended the quarter with 288 million monthly active users. We added 4 million users this quarter and 47 million across 2014. There are quarter-specific factors that impacted our net adds in Q4, which includes seasonality and a couple issues related to the launch of iOS 8. We'll discuss that in more detail later in this call. Importantly, I want to highlight that the user numbers we saw in January of this year indicate that our MAU trend has already turned around and our Q1 trend is likely to be back in the range of absolute net adds that we saw during the first three quarters of 2014.

Id. ¶ 88; ECF No. 92-7 at 3. When asked about the claims of "acceleration" in MAU growth, Costolo reaffirmed that "the MAU trend ha[d] already turned around," remarked, "we're in a great place there," and attributed the Q1 turnaround to "a combination of seasonality or return to organic growth and the set of product initiatives [Twitter] created to drive growth." Compl. ¶ 88; ECF No. 92-7 at 8. The takeaway for analysts was "reduced MAU growth targets but still [ ] very strong growth for the remainder of 2015." Compl. ¶ 105 (Morgan Stanley analyst explained "[w]e are reducing our full year 2015 core [Twitter] MAU expectations by 12mn (now modeling 16mn, 9mn and 6mn net additions the next 3 qtrs)").

Defendants also painted a positive picture of user engagement, although investors were given limited information. When one analyst asked directly whether user engagement was "improving or declining," Noto gave the following response:

[A]s we think about engagement, there are a number of different ways that we measure engagement-there's no one perfect way....Additionally, on the consumer side, many companies use DAU to MAU. And while that is a long-term goal of ours, to become a daily product, today we have great variance in DAU to MAU across geographies. In our more mature markets, we have very high DAU to MAU, 50% plus. In the emerging markets, we have very low DAU to MAU, at 20% range. They all migrate up to a higher rate over time. And so as we get to a point where we have a metric that's going to really reflect what we're trying to do, we'll share that with you. But, at this point, there's a number of them that we look at it, and no one metric to share.

Id. ¶ 84. To compare, at Analyst Day, Twitter reported a 48% DAU to MAU ratio in its top 20 markets. Id. ¶ 85(j). Then, despite describing Timeline views as a "measurement that doesn't reflect the initiatives that we're doing," Noto touted that metric as indicative of improving user engagement, explaining that "timelines views per MAU totaled 631, up 3% year-over-year and better than our outlook for timeline view per MAU to be flat versus Q4 2013." Compl. ¶ 86; ECF No. 92-7 at 6.

The message analysts took away from the 4Q 2014 results was clear: user engagement had improved. Id. ¶¶ 52, 85(d) n.22, 86 ("[S]lower MAU growth is more than offset by improvements in engagement and pricing.") ("MAU Growth about to Pick Up as Engagement Improves-Raising PT to $65...engagement rate growth accelerated.") ("Engagement and monetization exceeded expectations.").

Twitter offered no new hard user engagement data in 2014 Form 10-K, filed on March 2, 2015. Instead, Twitter stated generally that its "future revenue growth will depend on...our ability to...increase user engagement." Id. ¶ 44. Notably, Twitter's "note regarding key metrics" contained no reference to DAU:

We review a number of metrics, including monthly active users, or MAUs, timeline views, timeline views per MAU and advertising revenue per timeline view, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.

Id. ¶ 91. This despite referring multiple times in the Form 10-K to the importance of user engagement. E.g., id. ¶ 85(b) ("We believe that our future revenue growth will depend on, among other factors, our ability to attract new users, increase user engagement and ad engagement."). Additionally, at an investor conference on March 3, Noto described user retention and preventing disengaged users from dropping off the platform as Twitter's "number one opportunity...something we remain very focused on, it's a number we all look at everyday as an operating committee." Id. ¶ 28 n.8; ECF No. 106-9 at 9.

The lack of specific DAU data in Twitter's February and March filings caught the attention of analysts and officials from the Securities and Exchange Commission ("SEC"). An analyst from RBC Capital Markets explained the problem:

If timeline views are out then analysts naturally want a replacement. Less disclosure is always a bad thing especially for something that's important like engagement....I am totally open to the argument that [timeline views is] not a useful metric. The question is: What's that new metric?

Id. ¶ 42; see also ¶ 49 ("Usage is the Key Underlying Growth Driver, But Lacking Real Metrics....MAUs don't tell the whole story....Given that, we would also like to see Twitter report DAUs (Daily Active Users) on a regular basis at some point, since that seems to be the closest indication of usage frequency that could be externally reported in the near term." Rosenblatt Securities (June 17, 2015)). Similarly, in April 2015, the SEC reminded Twitter of the need to disclose "metric(s)...to explain trends in user engagement," citing its disclosure rules that required Twitter to "identify and discuss key performance indicators...that...management uses to manage the business and that would be material to investors." Id. ¶ 42.

Despite receiving the SEC's letter, on Twitter's Q1 2015 Earnings Call on April 28, 2015, Noto continued to tell investors that the Company could not provide "visibility" on user engagement. In response to a question about how analysts "should be thinking about monitoring engagement," Noto said:

In terms of engagement metrics, there's a lot of different metrics that we look at internally. There's not one metric for engagement. And so I can give you a sense of some of them and quite frankly, we would like to be able to give you more visibility on this, but there's just a number of different measurements. DAU is one measurement of engagement.

Id. ¶¶ 42, 103. Noto gave this explanation for Twitter's decision not to report specific DAU numbers: "It's a measurement that is dependent by market and you can have mixed shifts, so it could be a little bit misleading." Id. The only concrete information that Noto provided about DAU on the April 28 call was that "DAU to MAU ratios in the quarter were similar to what they were" at Analyst Day. Id.

Noto attributed strong user engagement in part to Twitter's new product initiatives. On the same call, he said "[w]e're seeing perhaps the most exciting results [from a new initiative called Recap]...These tweets are not only seeing higher engagement, they're bringing people back to Twitter more frequently. Importantly, the machine learning work we're doing for Recap is helping us to make these algorithms better and driving continuous improvements in engagement." Id. ¶ 103. More generally, Noto and Cosolo reiterated that one of Twitter's three key objectives was "strengthen[ing] Twitter's core," which "represents our focus to increase the number of logged-in users and their daily twitter use by increasing engagement and improving retention." Id. ¶ 127.

Despite Twitter's positive statements about MAU and user engagement, the Company struggled during the Class Period with stalled MAU growth numbers and "increasingly adverse trends in user engagement." Id. ¶ 51. Multiple CWs confirm the Company's MAU and DAU problems. According to CW-2, "everyone at the Company with whom he spoke understood the [MAU] growth was flat" between the summer of 2014 and the summer of 2015. Id. ¶ 68. Similarly, CW-4 stated that at bi-weekly companywide meetings known as "Tea Time," "Twitter executives reported that MAU and DAU trends were flattening out." Id. ¶ 70. CW-5 "observed that DAU trends were declining during the Class Period" and that "user base was flat or declining leading up to and continuing through the Class Period." Id. ¶ 71; see also id. ¶ 73 (CW-7) ("[B]y late 2014, DAU growth was also mostly flat."); (id. ¶ 74) (CW-8) ("[I]n early 2015, growth was 'really dying down.' "); (id. ¶ 77) (CW-11) ("[I]t was 'inescapable' in late 2014 and early 2015 that there was 'a lack of engagement' by users with the platform."). Many of the CWs reported that "it was apparent internally" during the Class Period that "the MAU growth trend was flat." Id. ¶ 98. For example, CW-2 explained that "everyone internally" understood the MAU growth was flat during CW-2's year-long tenure at Twitter (mid-2014 through mid-2015). Id. Indeed, the Vanity Fair article describes how leadership stopped displaying an MAU chart with actual and projected MAU at Twitter's Tea Time meetings because the "gap between reality and hope [had grown] so extreme." Id. ¶ 78.

According to the CWs, Twitter concealed the fact that its newer users "were less engaged than more seasoned users and were more susceptible" to dropping off of the Twitter platform. In other words, Twitter hid that new users were unlikely to become DAUs, risking future MAU growth. CW-1, who was employed as a senior manager of the Growth and Engineering teams until late 2015, explained that "the MAU growth achieved during 2014 mostly involved 'bringing back low-quality MAU' and that low-quality MAUs were less likely to become DAUs." Id. ¶ 67. "[B]ecause Twitter concealed adverse trends in user engagement, investors could not gauge the quality of MAU growth and were misled as to MAU growth trends." Id. ¶ 58.

Twitter used various strategies to inflate its MAU numbers. For example, "the Company could increase its MAU in a given month by prompting users whose accounts had become inactive to log in." Id. ¶ 57; see also id. ¶ 69 (Vanity Fair article corroborating this technique). These "zombie users" "were more likely to drop off the platform" than "organic growth MAUs" who signed on to Twitter unprompted. Id. CW-3 agreed "that 'zombie users' and robot users contributed to Twitter's overall MAU metric." Id. ¶ 69. CW-6 noted that the existence of "fake accounts contributed greatly to the number of 'new' users and active users," thus "falsely inflat[ing] Twitter's overall metrics." Id. ¶ 72. "When CW-6 reported the issue of the fake accounts and presented the business case to CW-6's manager, he was told to 'do your job and be quiet.' " Id. Additionally, "automated third party users," who "did not actually log in to Twitter and use the platform [ ] were still counted as MAUs as the result of a third party application automatically pinging Twitter's servers for updates." Id. ¶ 87(c). Investors reported on these "auto-pulling" users, with one calling them "a point of interest...as it means a large amount of the...active monthly users Twitter reported...are not real consumers that have the potential to view and interact with their advertising and organic content." Id. ¶ 89(e).

Low DAU and MAU growth forced Twitter to alter its advertising strategy. In late 2014, according to CW-7, management increased the limits on the number of ads a user could see in a given time frame. Id. ¶ 73. "[I]n order to improve the advertisement metrics and the number of advertisements sent to users, the 'Ad Load' had to be increased to compensate for the lack of user (MAU) growth and user engagement (DAU) growth." Id. ¶ 73. Twitter then pointed analysts and SEC staff to ad engagements as a metric that is "helpful to investors to understand" and "monitor trends in user engagement," id., despite the fact that "ad engagements (a monetization metric) was moving in the opposite direction from the trend in user engagement during the Class Period." Id. ¶ 85(i). For example, Twitter reported that ad engagements grew by 70% year over year in Q4 2014, and 32% year over year in Q1 2015. Id. ¶ 85(i). Twitter also responded to the SEC's request for a disclosure of a reliable user engagement metric with the following comment: "The Company respectfully advises the Staff that it has included two metrics, changes in ad engagements and changes in cost per ad engagement." Id. ¶ 110(c). But according to CW-11, linking user engagement with ad engagement was misleading because "there is no direct correlation between advertising engagement and MAU or DAU." Id. In other words, ad engagements was a poor measure of engagement because, as CW-7 explained, Ad Load could always be "increased to compensate for the lack of user (MAU) growth and user engagement (DAU) growth." Id. ¶ 73.

The weeks before the end of the Class Period saw the departure of several key Twitter executives. First, Costolo "was forced from his position as CEO on July 1, 2015." Id. ¶ 129. Both the CWs and investors attributed Costolo's resignation to the Company's problems with user growth and engagement. Id. ¶¶ 130-31. Twitter's chief of corporate communications, Gabriel Stricker, was the next to announce his departure on July 16, 2015. Id. ¶ 132. Other "key executives" followed. Id. ¶ 133 (Vice President of Corporate Development and Strategy, Rishi Garg; Christian Oestlien, Vice President of Product Management; and Todd Jackson, a product director). One analyst observed at the end of July 2015 that "only 9 of the 13 @Twitter execs that presented at their Nov 2014 analyst day are left." Id. ¶ 133.

C. End of the Class Period

On July 28, 2015, "Twitter hosted a call with analysts and investors to discuss the Company's second-quarter results." Id. ¶ 60. In contrast to prior, upbeat forecasts, Noto told investors: "[W]e do not expect to see sustained meaningful growth in MAUs...[for] a considerable period of time." Id. Generally, Twitter reported that its "growth rate in users is slowing quite dramatically" and that investors should not "expect a change in our growth rate...for a while." Id. More specifically, "Noto reported that...user engagement had significantly declined since Analyst Day, with the DAU to MAU ratio falling from 48% to 44%." Id. ¶ 61. In the same vein, "Noto acknowledged that new product initiatives 'ha[d] not yet had a meaningful impact on growing our audience [i.e., MAU] or participation [i.e., user engagement].' " Id. ¶ 62. Twitter also admitted that the lack of user engagement could negatively impact advertising revenue: "[I]f we do not grow audience, drive increased engagement or begin to monetize other areas such as Logged Out, it is possible that on some days our revenue could be impacted by limited availability for specific ad types." Id. ¶ 87 (g). In other words, because Twitter only sent ads to a user's timeline when the user logged in to the platform, low user engagement was constraining Twitter's ability to generate ad revenue. Id.

After the earnings call, Twitter's share price dropped nearly 15%. Id. ¶ 64. According to the Vanity Fair article, the 2Q 2015 call represented a conscious decision to "come clean" about lagging user growth and engagement. Id. ¶ 78.

D. Post-Class Period Activity

After the July 28 revelations, Twitter no longer wavered on the centrality of DAU to the Company's success. During the Q4 2015 Earnings Call, for example, Twitter explained that "[t]he one engagement metric that we look at holistically is daily active users." Id. ¶ 85(b). Moreover, Twitter reminded investors that the importance of user engagement only grows if MAU growth decelerates. Id. ¶ 85(d) (Noto explains at September 16, 2015 conference that "as your MAU growth slows, engagement becomes a much bigger factor"). Relatedly, Twitter finally disclosed specific DAU numbers, illustrating the adverse user engagement trends that had existed throughout the Class Period. "On October 27, 2016, nearly 18 months after the Q1 2015 earnings call, Defendants disclosed DAU growth for Q1 2016 versus Q1 2015." Id. ¶ 102(a). The Q1 2015 DAU/MAU ratio was 43.8%, down over 4% from the 48% ratio reported in November 2014 at Analyst Day. Id. Defendants also acknowledged that Twitter's new product initiatives had not produced meaningful user engagement returns going as far back as September 2014. In September 2015, the Company gave this report about "the last year+":

Some of [the product initiatives] have statistically shown positive results, but they haven't been impactful to the numbers. And the reality is, is for us to reach that next cohort of users, we have to appeal to their needs, and we have to make the product simple and easy enough. That requires a fundamental product change.

Id. ¶ 89(g).

Qualifying its MAU growth, Twitter explained that its newer users were "lower quality" than existing users, and therefore less likely to become DAUs. For example, Noto told investors at a September 2015 investor conference that "the more recent MAUs that we've acquired....They're lower quality or lower conversion to DAU. And [we] just wanted to be transparent about that." Id. ¶ 87(h). Similarly in December 2015 Noto explained that "the newer MAUs that we are acquiring were not as engaged as our existing MAUs." Id.

Analysts quickly reported on Twitter's adverse user engagement and DAU numbers. Two weeks after the close of the Class Period, the Susquehanna Financial Group published a chart showing a decline in the DAU/MAU ratio from an average of 48% during the first three quarters of 2014 to 44% during the first quarter of 2015. Id. ¶ 102(c). Forbes noted that "engagement [ ] has been declining since last fall," and the Wall Street Journal reported that user engagement had "gone south" since Analyst Day. Id. ¶ 87(b).

III. LEGAL STANDARD

A. Dual Pleading Requirements

"In a typical § 10(b) private action a plaintiff must prove (1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation." Stoneridge Inv. Partners, LLC v. Sci.-Atlanta, 552 U.S. 148, 157, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008).

On a motion to dismiss, the Court accepts the material facts alleged in the complaint, together with reasonable inferences to be drawn from those facts, as true. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). However, "the tenet that a court must accept a complaint's allegations as true is inapplicable to threadbare recitals of a cause of action's elements, supported by mere conclusory statements." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Moreover, while a plaintiff generally need only plead "enough facts to state a claim to relief that is plausible on its face" to survive a motion to dismiss, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), "[s]ecurities fraud class actions must meet the higher, exacting pleading standards of Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act ('PSLRA')." Oregon Pub. Employees Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 604 (9th Cir. 2014).

Under the PSLRA and Rule 9(b), a complaint must "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind" with respect to each alleged false statement or omission, and a party must "state with particularity the circumstances constituting fraud or mistake." 15 U.S.C. § 78u-4(b)(2)(A) ; Fed. R. Civ. P. 9(b) ; see also Oregon Pub. Employees Ret. Fund, 774 F.3d at 605. "In order to show a strong inference of deliberate recklessness, plaintiffs must state facts that come closer to demonstrating intent, as opposed to mere motive and opportunity." In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 974 (9th Cir. 1999), abrograted on other grounds by, S. Ferry LP, No. 2 v. Killinger, 542 F.3d 776, 784 (9th Cir. 2008). If the complaint does not satisfy the PSLRA's pleading requirements, the Court must grant a motion to dismiss the complaint. 15 U.S.C. § 78u-4(b)(3)(A).

B. Falsity and Materiality

The PSLRA provides that "the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed." 15 U.S.C. § 78u-4(b)(1)(B). For statements to be actionable under the PSLRA, they must be both false or misleading and material.

A statement or omission is misleading under the PSLRA and Section 10(b) of the Exchange Act "if it would give a reasonable investor the impression of a state of affairs that differs in a material way from the one that actually exists." Berson v. Applied Signal Tech., Inc., 527 F.3d 982, 985 (9th Cir. 2008). "[O]nly if 'reasonable minds' could not disagree that the challenged statements were not misleading should the district court dismiss under 12(b)(6)." Warshaw v. Xoma Corp., 74 F.3d 955, 959 (9th Cir. 1996).

A false or misleading statement or omission is material if there is a "substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available." TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976). "To plead materiality, the complaint's allegations must 'suffice to raise a reasonable expectation that discovery will reveal evidence satisfying the materiality requirement, and to allow the court to draw the reasonable inference that the defendant is liable.' " Reese v. Malone, 747 F.3d 557, 568 (9th Cir. 2014) (quoting Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 131 S.Ct. 1309, 179 L.Ed.2d 398 (2011) ). " 'Although determining materiality in securities fraud cases should ordinarily be left to the trier of fact, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim.' " Id. (quoting In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010) ). While statements made before or after the class period are not themselves actionable, they may be relevant in that they shed light on the "truth or falsity of Class Period statements." In re Invision Techs., Inc. Sec. Litig., No. C04-03181 MJJ, 2006 WL 538752, at *2 (N.D. Cal. Jan. 24, 2006).

C. Scienter

The required state of mind under the PSLRA is a "mental state embracing intent to deceive, manipulate, or defraud." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193-94 n.12, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976). In order to adequately establish scienter, the complaint must "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." 15 U.S.C. § 78u-4(b)(2)(A). The "strong inference" required by the PSLRA "must be more than merely 'reasonable' or 'permissible'-it must be cogent and compelling, thus strong in light of other explanations." Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). "A court must compare the malicious and innocent references cognizable from the facts pled in the complaint, and only allow the complaint to survive a motion to dismiss if the malicious inference is at least as compelling as any opposing innocent inference." Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 991 (9th Cir. 2009). In evaluating whether a complaint satisfies the "strong inference" requirement, courts must consider the allegations and other relevant material holistically, not "scrutinized in isolation." In re VeriFone Holdings, 704 F.3d 694, 701 (9th Cir. 2012).

Deliberate or conscious recklessness constitutes intentional conduct sufficient to satisfy the scienter requirement. "An actor is deliberately reckless if he had reasonable grounds to believe material facts existed that were misstated or omitted, but nonetheless failed to obtain and disclose such facts although he could have done so without extraordinary effort." Reese, 747 F.3d at 569 (quoting In re Oracle Corp. Sec. Litig., 627 F.3d 376, 390 (9th Cir. 2010) (internal alterations omitted)). "[T]he ultimate question is whether the defendant knew his or her statements were false, or was consciously reckless as to their truth or falsity." Gebhart v. SEC, 595 F.3d 1034, 1042 (9th Cir. 2010). "Facts showing mere recklessness or a motive to commit fraud and opportunity to do so provide some reasonable inference of intent, but are not independently sufficient." Reese, 747 F.3d at 569 (quoting In re Silicon, 183 F.3d at 974 ).

IV. DISCUSSION

Plaintiff's Complaint contains dozens of allegedly false or misleading Class Period statements. The challenged statements fall into three broad categories: 1) claims based on the omission of DAU metrics, 2) claims based on affirmative statements about user engagement, and 3) claims based on affirmative statements about MAU. The Court addresses each category of statement, then discusses scienter separately.

A. Claim Based on Omission of DAU Metrics

Plaintiff's strongest argument is that Twitter misled investors by failing to disclose DAU metrics during the class period. Twitter responds by arguing that it had no duty to disclose DAU metrics. ECF No. 91-1 at 15. Twitter is correct that, as a general matter, "Section 10(b) and Rule 10b-5(b) do not create an affirmative duty to disclose any and all material information." In re Mellanox Techs. Ltd. Sec. Litig., No. 13-CV-04909-JST, 2014 WL 12650991, at *17 (N.D. Cal. Mar. 31, 2014) (citing Matrixx Initiatives, Inc., 131 S.Ct. at 1321 ). It is well settled, however, that a duty to disclose does arise where an omission is misleading because it "affirmatively create[s] an impression of a state of affairs that differs in a material way from the one that actually exists." Brody v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002). In other words, while Twitter had no duty to disclose in the abstract, the Company's omission of DAU data is actionable if it was misleading.

Plaintiff argues that omission of DAU was misleading for three main reasons. First, the Complaint alleges that non-disclosure of DAU was misleading because "Twitter management relied on DAU as its primary user engagement metric during the Class Period." Id. ¶ 104(d). As an initial matter, Plaintiff has plausibly alleged that DAU was in fact Twitter's main user engagement metric. At Analyst Day in November 2014, Twitter unveiled an "operational goal of building the world's largest daily audience." Id. ¶ 31. Several months later, in response to an analyst question whether "people [should] still focus on monthly active users," Noto explained that Twitter's "number-one priority is to strengthen the core and make Twitter an increasingly daily use case for the people who come to Twitter." Id. ¶ 33. Twitter's SEC filings during the Class Period continuously referred to the importance of user engagement, e.g., id. ¶ 85(c) ("We believe that our future revenue growth will depend on, among other factors, our ability to attract new users, increase user engagement and ad engagement."). Finally, after the Class Period ended, Noto stated clearly that "[t]he one engagement metric that we look at holistically is daily active users," and "as it relates to engagement..., [t]he one that is probably the most important is daily active users." Id. ¶ 85(b). The CWs' testimony and analysts' reporting confirms the centrality of DAU. Id. ¶ 39 (analyst reports that "TWTR set some ambitious goals as it aims to have the largest DAU in [the] world with over $14 billion of annual revenue"); id. ¶ 67 ("CW-1 reported that DAU

was the primary engagement metric that Twitter tracked internally after Timeline Views were no longer being reported."). In sum, taking the facts alleged in the Complaint as true, starting months before the Class Period, DAU was Twitter's primary user engagement metric.

But just because DAU was Twitter's key engagement metric, it does not necessarily follow that its omission "affirmatively create[s] an impression of a state of affairs that differs in a material way from the one that actually exists." Brody, 280 F.3d 997, 1006. To make this showing, Plaintiff points the Court to Defendants' statements that Twitter tracks user engagement in more than one way. For example, on February 5, 2014, when one analyst asked directly whether user engagement was "improving or declining," Noto gave the following response:

Id. ¶ 84. Similarly, on the April 28 Earnings Call, Noto told investors the following:

Id. ¶¶ 42, 103. The Court does not see how these statements are actionable. The difference between "DAU is one measure of engagement" and the hypothetical "DAU is the primary measure of engagement" is too small to render the first statement misleading. Nor is it inconsistent to report that there are "a lot of different metrics" for user engagement just because one of those statements is more closely tracked than the others. In sum, these statements do not render Twitter's omission of specific DAU data misleading.

Second, Plaintiff argues that omission of the DAU metric was misleading when set against Twitter's statements regarding MAU growth. Specifically, Plaintiff claims that "without DAU, investors were led to believe that Defendants' outsized MAU projections were viable, MAU growth was high quality (i.e., new users were just as engaged as existing users), and new product features designed to increase growth were working." ECF No. 94 at 14. Twitter responds that it has "no independent legal duty to provide 'context' " for its MAU numbers, and that to hold otherwise would "run[ ] afoul of the principle that securities laws 'do[ ] not impose a duty of completeness.' " ECF No. 91-1 at 18 (quoting City of Royal Oak Ret. Sys. v. Juniper Networks, 880 F.Supp.2d 1045, 1066 (N.D. Cal. 2012) ). Again, although this Court acknowledges that there is no duty of completeness, a plaintiff can state a 10(b) claim based on a failure to provide "context" where that failure "affirmatively create[s] an impression of a state of affairs that differs in a material way from the one that actually exists."

Brody, 280 F.3d at 1006. Indeed, Twitter acknowledges the viability of this theory in its motion. ECF No. 91-1 at 18 (("Although a duty to disclose could attach if MAU data was misleading absent DAU disclosure....").

The picture as to this theory of relief is different. To succeed on this theory, Plaintiff must allege that Twitter reported positive MAU growth, that Twitter was simultaneously experiencing adverse DAU trends, and that those DAU trends made MAU growth implausible. Plaintiff has sufficiently pleaded all three steps. Plaintiff alleged that Twitter told investors that it was on track to produce the kind of MAU growth Company officials described at Analyst Day. During the February 5 Earning Call, Costolo acknowledged lower than expected MAU growth at the end of 2014, but described signs of a rebound in early 2015:

Id. ¶ 88; ECF No. 92-7 at 3 (emphasis added). When asked about the claims of "acceleration" in MAU growth, Costolo said again that the "MAU trend ha[d] already turned around," remarked, "we're in a great place there," and attributed the Q1 turnaround to "a combination of seasonality or return to organic growth and the set of product initiatives [Twitter] created to drive growth." Compl. ¶ 88; ECF No. 92-7 at 8. These statements convey a message of that MAU was trening positively, and they were interpreted by analysts as such. Id. ¶ 105 (reporting "reduced MAU growth targets but still [ ] very strong growth for the remainder of 2015); id. ¶ 86 ("[S]lower MAU growth is more than offset by improvements in engagement and pricing.") ("MAU Growth about to Pick Up as Engagement Improves-Raising PT to $65...engagement rate growth accelerated.") ("Engagement and monetization exceeded expectations.").

Simultaneously, Twitter was experiencing flat or declining DAU trends and other problems with user engagement. As Defendants admitted after the end of the Class Period, "user engagement had significantly declined since Analyst Day, with the DAU to MAU ratio falling from 48% to 44%." Id. ¶ 61. In their motion and on reply, Defendants challenge Plaintiff's calculation of these figures and the inferences to be drawn from them. For example, Defendants note that "the analyst report [from which Plaintiff obtained the 44% figure] actually compares a ratio for the first three quarters of 2014 with a ratio for the second quarter of 2015." ECF No. 91-1 at 23. As a result, Defendants argue, Plaintiff cannot allege precisely when the ratio declined. ECF No. 104 at 8. But at the motion to dismiss phase, Plaintiff's numbers give rise to the inference that the DAU to MAU ratio was declining during the Class Period. The fact that Defendants' alleged obfuscation of their metrics, Compl. ¶ 102(a) n.41, makes it difficult to say when within the Class Period the decline occurred does not defeat that inference. Defendants also argue that a decline in the DAU to MAU ratio does not necessarily mean the total number of DAUs also declined. ECF No. 104 at 9. But Plaintiff did allege a decline in overall DAU from Analyst Day to Q1 2015. Compl. ¶ 102(a) (from 109 million to 105.8 million DAU).

Nor do Defendants' mathematical arguments persuade the Court that it is "[i]t is entirely reasonable that DAUs increased but at a slower rate than the MAU increase." ECF No. 104 at 9. For example, Twitter compares DAU to MAU ratios for its top 20 markets with MAU numbers for the entire company to extrapolate DAU growth. Id. at 9. Twitter criticized Plaintiff for exactly this type of supposedly improper comparison. E.g., ECF No. 91 at 25 n.13. All this goes to show why these debates over the accuracy of Plaintiff's numbers are not appropriate at the motion to dismiss phase.

In addition to this allegation about the DAU to MAU ratio, in September 2015, Noto told investors that "the more recent MAUs that we've acquired....They're lower quality or lower conversion to DAU. And [we] just wanted to be transparent about that." Id. ¶ 87(h). This statement and the allegations of a declining DAU to MAU ratio are consistent with the testimony of the CWs, many of whom reported adverse DAU trends and problems with user engagement during the Class Period. Id. ¶ 70. (CW-4 stated that at Tea Time meetings, "Twitter executives reported that MAU and DAU trends were flattening out.") (CW-5 "observed that DAU trends were declining during the Class Period" and that "user base was flat or declining leading up to and continuing through the Class Period.").

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. 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. Twitter acknowledged the link between DAU and MAU years prior to the class period in its 2013 Registration Statement, explaining that "[t]o the extent our user growth rate slows, our success will become increasingly dependent on our ability to increase levels of user engagement." Id. ¶ 24. The CWs agreed. Id. ¶ 75 (CW-9) ("MAU says nothing about frequency" of use and therefore does not provide "sufficient detail to measure an advertising opportunity."); Id. ¶ 76 (CW-10) (" 'MAU was a terrible metric' and there is no way you could 'judge the health of the company using MAU alone.' "). Finally, as one tech analyst explained, MAU metrics "indicate very little about true engagement on a platform, because using an app every 30 days isn't that much different from never using it at all. For social and communication apps, the key is daily usage because it tells you how people are really engaging." Id. ¶ 121 (internal alterations omitted).

Putting these elements together, Plaintiff has plausibly alleged that, set against Defendants' claims that MAU growth had "turned around" in early 2015, the omission of DAU was misleading. As the Ninth Circuit has explained, " 'once defendants cho[o]se to tout' positive information to the market, 'they [are] bound to do so in a manner that wouldn't mislead investors,' including disclosing adverse information that cuts against the positive information." Schueneman v. Arena Pharm., Inc., 840 F.3d 698, 705-06 (9th Cir. 2016) (quoting Berson v. Applied Signal Tech., Inc., 527 F.3d 982, 987 (9th Cir. 2008) ). In re LendingClub Securities Litigation, from this district, is also instructive. 254 F.Supp.3d 1107 (N.D. Cal. 2017). There, defendant LendingClub "operated an online peer-to-peer marketplace to match borrowers and investors for a variety of loans." Id. at 1110, 2017 WL 2289186, at *1. The plaintiffs challenged, among other things, the omission on LendingClub's IPO registration statement the existence of a related company called Cirrix, which was formed for "the sole purpose of purchasing loans from LendingClub." Id. at 1117, 2017 WL 2289186, at *7. The court agreed the omission was misleading, noting that "investors would also have been interested to know that millions of dollars of loans were not the result of organic matches in the marketplace reflecting participants' trust in LendingClub's purportedly neutral platform, but were inflated artificially through self-dealing disguised as real transactions." Id. at 1118, 2017 WL 2289186, at *8. Likewise, here, disclosure of the fact that DAU was flat or declining during the Class Period would have put investors on alert that MAU was not really accelerating in 2015 and that the aggressive MAU projections announced at Analyst Day were unlikely to materialize. In the absence of DAU data, investors interpreted Defendants' statements as reassurances that the Company had experienced and would continue to experience positive growth and engagement trends. Compl. ¶ 86 ("[S]lower MAU growth is more than offset by improvements in engagement and pricing.") ("MAU Growth about to Pick Up as Engagement Improves-Raising PT to $65...engagement rate growth accelerated.") ("Engagement and monetization exceeded expectations."). The omission was therefore misleading.

Third, Plaintiff claims the omission of DAU was misleading when set against Twitter's positive statements about user engagement trends. ECF No. 94 at 17. The Court first rejects Defendants' response that there was no adverse user engagement trend in the first place. ECF No. 91-1 at 6. As discussed above, Plaintiff adequately alleged flat or declining DAU and other problems with user engagement. Despite those negative trends, Defendants' Class Period statements suggested user engagement was improving. During the February 5, 2015 Earnings Call, for example, an analyst asked Noto directly whether "engagement was improving or declining." Compl. ¶ 86. Noto gave the following response:

In our more mature markets, we have very high DAU to MAU, 50% plus. In the emerging markets, we have very low DAU to MAU, at 20% range. They all migrate up to a higher rate over time. And so as we get to a point where we have a metric that's going to really reflect what we're trying to do, we'll share that with you. But, at this point, there's a number of them that we look at it, and no one metric to share.

Id. ¶ 84. To compare, at Analyst Day, Twitter reported a 48% DAU to MAU ratio in its top 20 markets. Noto's co