Key Points:
- Apple agrees to pay $490 million to settle a class-action lawsuit alleging Tim Cook misled shareholders about iPhone demand in China.
- The lawsuit originated from Apple’s announcement in January 2019 that it would slash quarterly revenue forecasts due to escalating U.S.-China trade tensions.
- Tim Cook’s reassurances about China’s sales outlook were challenged, leading to a significant drop in Apple’s stock value.
- Apple’s share price has more than quadrupled since the lawsuit’s inception in 2019, propelling its market value to over $2.6 trillion.
Apple Inc. has reached a $490 million settlement agreement to resolve a class-action lawsuit accusing Chief Executive Tim Cook of misleading shareholders by concealing weakening demand for iPhones in China. The preliminary settlement, filed with the U.S. District Court in Oakland, California, awaits approval from U.S. District Judge Yvonne Gonzalez Rogers.
The lawsuit stems from Apple’s surprise announcement on January 2, 2019, wherein the tech giant disclosed its intention to slash quarterly revenue forecasts by up to $9 billion, citing escalating trade tensions between the United States and China. This revelation sparked concern among investors, leading to a significant drop in Apple’s stock value.
Central to the lawsuit was Cook’s statement during an analyst call on November 1, 2018, where he reassured investors that China was not experiencing similar sales pressures faced by other markets due to weakened currencies. However, just days later, Apple instructed its suppliers to reduce production, signaling underlying issues with iPhone demand.
While Apple denied wrongdoing, it settled the lawsuit to avoid prolonged litigation costs and distractions. Shawn Williams, a partner at Robbins Geller Rudman & Dowd representing the shareholders, hailed the settlement as an “outstanding result” for the class, covering investors who purchased Apple shares in the two months following Cook’s comments.
The lead plaintiff in the case is the Norfolk County Council as Administering Authority of the Norfolk Pension Fund, based in Norwich, England. Last June, Judge Rogers rejected Apple’s motion to dismiss the lawsuit, finding merit in the argument that Cook’s statements regarding sales outlook were misleading.
Under the settlement terms, lawyers representing the shareholders may seek fees of up to 25% of the settlement amount. Despite the substantial payout, the settlement represents only a fraction of Apple’s annual net income, equivalent to less than two days of profit.
Since the lawsuit’s inception in 2019, Apple’s share price has soared, propelling the company’s market value to over $2.6 trillion. The case resolution marks a significant milestone in Apple’s legal battles, providing closure to investors and allowing the company to focus on its ongoing operations.
