Apple has agreed to a $490 million settlement to resolve a class-action lawsuit accusing CEO Tim Cook of misleading shareholders about declining iPhone demand in China.
“A preliminary settlement was filed on Friday with the U.S. District Court in Oakland, California, and requires approval by U.S. District Judge Yvonne Gonzalez Rogers.”
This legal action stemmed from Apple’s unexpected announcement on January 2, 2019, when it revealed plans to slash its quarterly revenue forecast by up to $9 billion, citing U.S.-China trade tensions.
“Cook had told investors on a Nov. 1, 2018, analyst call that although Apple faced sales pressure in markets such as Brazil, India, Russia, and Turkey, where currencies had weakened, ‘I would not put China in that category.'”
Shortly after Cook’s remarks, Apple instructed its suppliers to reduce production. This adjustment marked Apple’s first lowered revenue forecast since the iPhone’s inception in 2007, causing a 10% drop in shares the following day, wiping out $74 billion in market value.
“Apple and its lawyers did not immediately respond to requests for comment on the ruling.”
While Apple denied liability, it chose to settle to avoid the costs and disruptions of prolonged litigation. Shawn Williams, a lawyer for the shareholders, hailed the settlement as a significant win for the class, which encompasses shareholders who purchased Apple shares between Cook’s statements and the revenue forecast.
“Apple posted $97 billion of net income in its latest fiscal year, and its payout equals a little under two days of profit.”
Last June, Judge Rogers refused to dismiss the lawsuit, finding it plausible that Cook was discussing Apple’s sales outlook rather than currency fluctuations, and that Apple was aware of China’s slowing economy and potential demand decline.
“The lead plaintiff is the Norfolk County Council as Administering Authority of the Norfolk Pension Fund, located in Norwich, England.”
Lawyers for the shareholders may seek fees of up to 25% of the settlement amount.
“Apple’s share price has more than quadrupled since January 2019, giving the company a more than $2.6 trillion market value.”
The case is titled In re Apple Inc Securities Litigation, U.S. District Court, Northern District of California, No. 19-02033.
