Apple has reached a settlement in a class-action lawsuit that accused CEO Tim Cook of defrauding shareholders by hiding a decline in iPhone demand in China. The company has agreed to pay $490 million to resolve the case, pending approval from US District Judge Yvonne Gonzalez Rogers. The lawsuit originated from Apple’s unexpected announcement on January 2, 2019, that it would reduce its quarterly revenue forecast by up to $9 billion, citing US-China trade tensions as the reason.
On November 1, 2018, during an analyst call, Cook informed investors about sales pressure in various markets due to weakened currencies. However, he stated that he would not categorize China in the same manner. Shortly after his comments, Apple instructed suppliers to curtail production. This lowered revenue forecast was the first of its kind for Apple since the launch of the iPhone in 2007, causing the company’s shares to plummet by 10% and wiping out $74 billion of its market value.
While Apple denies any wrongdoing, it has chosen to settle the lawsuit to avoid the cost and distraction of litigation. Shawn Williams, a partner representing the shareholders, described the settlement as an “outstanding result” for the class. The settlement encompasses investors who purchased Apple shares between Cook’s comments and the revenue forecast. It is worth noting that the settlement payment amounts to just under two days of Apple’s net income of $97 billion in its latest fiscal year.
US District Judge Yvonne Gonzalez Rogers had previously declined to dismiss the lawsuit, finding it plausible that Cook had discussed Apple’s sales outlook rather than currency changes during the analyst call. She also stated that Apple was aware of China’s slowing economy and the potential decline in demand. The lead plaintiff in the case is the Norfolk County Council, representing the Norfolk Pension Fund in Norwich, England.
Apple’s share price has experienced significant growth since January 2019, with its value increasing more than fourfold. As a result, the company’s market value now exceeds $2.6 trillion. The case, officially known as In re Apple Inc Securities Litigation, is being heard in the US District Court for the Northern District of California under case number 19-02033.
In conclusion, the settlement of $490 million resolves a class-action lawsuit against Apple and Tim Cook, alleging the concealment of falling iPhone demand in China. While Apple maintains its innocence, the company has chosen to settle to avoid the costs and distractions associated with litigation. US District Judge Yvonne Gonzalez Rogers found it plausible that Cook had discussed sales outlook rather than currency changes and highlighted Apple’s awareness of China’s economic slowdown. As Apple’s share price continues to soar, reaching a market value of over $2.6 trillion, the settlement payment amounts to just under two days of the company’s net income.
