Apple has agreed to a $490 million settlement to resolve a class-action lawsuit alleging that Chief Executive Tim Cook concealed declining iPhone demand in China, defrauding shareholders in the process.
The preliminary settlement, filed on Friday with the U.S. District Court in Oakland, California, is subject to approval by U.S. District Judge Yvonne Gonzalez Rogers.
The lawsuit stemmed from Apple’s unexpected announcement on January 2, 2019, revealing that the iPhone maker would reduce its quarterly revenue forecast by up to $9 billion, citing U.S.-China trade tensions.
During an analyst call on November 1, 2018, Cook assured investors that while Apple faced sales pressures in various markets due to weakening currencies, he did not consider China to be among them. However, a few days later, Apple instructed suppliers to reduce production.
This revenue forecast reduction marked Apple’s first since the iPhone’s launch in 2007, leading to a 10% drop in Apple’s shares the following day, wiping out $74 billion of market value.
Apple and its legal representatives did not immediately respond to requests for comment on the settlement. The Cupertino-based company denied any liability but chose to settle to avoid the costs and distractions associated with litigation, according to court documents.
Shawn Williams, a lawyer representing the shareholders, hailed the settlement as a significant outcome for the class, which includes shareholders who purchased Apple shares in the two months between Cook’s comments and the revenue forecast.
Last June, Judge Rogers declined to dismiss the lawsuit, finding it plausible that Cook had discussed Apple’s sales outlook rather than currency changes, and suggesting that Apple was aware of the slowing Chinese economy and the potential for declining demand.
The lead plaintiff in the lawsuit is the Norfolk County Council as the Administering Authority of the Norfolk Pension Fund, located in Norwich, England.
The shareholders’ lawyers may seek fees of up to 25% of the settlement amount.
Since January 2019, Apple’s share price has more than quadrupled, resulting in the company’s market value surpassing $2.6 trillion.
