Twitter including some of its executives and directors are under scrutiny by a law firm for possible securities fraud related to the company’s statements regarding its net users and advertising revenues for the first quarter of 2015.

Twitter Inc (TWTR) Under Scrutiny Over Possible Securities Fraud

TheGrantLawFirm initiated an investigation on Twitter after the popular microblogging company released its financial results for the first quarter on Tuesday.

Did Twitter disseminate unduly optimistic public statements?

According to the law firm, its investigation is focused on the statements made by Twitter between February 5 and April 28, 2015.

TheGrantLawFirm wants to determine whether the company disseminated unduly optimistic and misleading public statements regarding its sales from advertising and revenue growth.

The law firm noted that Twitter incurred losses of $162 million during the first quarter, which is $30 million lower than its results during the same period last year.

TheGrantLawFirm said, “In light of this poor earnings report, and the accumulated losses which Twitter has sustained since its inception, questions have further been raised about its use of stock-based compensation and the amount of compensation earned by its new chief executive officer.”

Last February, Twitter announced that its financial results for the fourth quarter. The company reported that its revenue rose 97% to $479 million year-over-year. Its net loss was $125 million.

At the time, Twitter CEO Dick Costolo said, “We closed out the year with our business advancing at a great pace. Revenue growth accelerated again for the full year, and we had record quarterly profits on an adjusted EBITDA basis. In addition, the trend thus far in Q1 leads us to believe that the absolute number of net users added in Q1 will be similar to what we saw during the first three-quarters of 2014.”

Twitter stock performance

The law firm also noted that the trading for the shares of Twitter was temporarily halted yesterday due to an earnings leak, which resulted to a 20% decline in its stock price. Twitter’s shares continue to trade lower.

The shares of Twitter are trading $38.35 per share, down by more than 9% around 3:34 in the afternoon in New York. Over the past 52 weeks, the stock traded between $29.51 and $55.99 per share. The company lost almost 10% of its stock value over the past year.

Twitter stock performance

The analysts at brokerage firms covering the stock reduced their price targets following its weak financial performance for the quarter.