SEC Questioned Twitter Over Spam Account Calculation

By Will Feuer

The U.S. Securities and Exchange Commission sent a letter to Twitter Inc. in June asking the social-media company for more information over how it calculates its estimate of the prevalence of spam or false accounts on the platform, according to a regulatory filing disclosed Wednesday.

In the letter, dated June 15 and sent to Twitter Chief Executive Parag Agrawal, SEC staff asked Twitter to disclose the methodology used in calculating its estimate that the average number of false or spam accounts during fiscal 2021 continued to represent fewer than 5% of its monetizable daily active users, or mDAU.

The letter also referred to a March 2019 error that resulted in an overstatement of mDAU from 2019 through 2021.

"Given that the error persisted for three years, please tell us how you concluded there was not a material weakness in your internal control over financial reporting and that your disclosure controls and procedures were effective as of March 31, 2022," the SEC said in the letter.

In a response letter, dated June 22 and sent on behalf of Twitter by attorneys from the law firm Wilson Sonsini Goodrich & Rosati, the company directed the SEC to its 10-K, or annual report, saying that "Twitter believes that it already adequately discloses the methodology that it uses in calculating these figures."

"Twitter respectfully informs the staff on a supplemental basis that the review is conducted manually by humans reviewing (in replicate) thousands of accounts, randomly chosen out of the accounts that Twitter counts as mDAU," Twitter said in its response letter. "This review is conducted every quarter and Twitter has been performing this review for many years."

Twitter said the 2019 error that led to an overstatement of mDAU was immaterial.

"The overstatement had no impact on any of Twitter's key metrics other than mDAU, and had no impact on Twitter's financial statements," the company said. "With respect to mDAU, the overstatement represented less than one percent of mDAU for each of the quarters from the fourth quarter of 2020 through the fourth quarter of 2021."

Representatives for Twitter didn't immediately respond to a request for comment.

Write to Will Feuer at Will.Feuer@wsj.com

(END) Dow Jones Newswires

August 24, 2022 11:33 ET (15:33 GMT)

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