Apple has agreed to settle a class-action lawsuit alleging that CEO Tim Cook misled shareholders and hid from them a decline in demand for iPhones in China. The settlement agreement is pending approval by Judge Yvonne Gonzalez Rogers.
The incident took place on January 2, 2019, when Apple suddenly announced that its quarterly revenue forecast would be reduced by up to $9 billion due to tensions between the US and China. In a call with analysts on November 1, 2019, Cook said that Apple faced difficulties in markets such as Brazil, India, Russia and Turkey, where local currencies have weakened. As the company's CEO noted, “I would not classify China in this category.” A few days later, Apple ordered suppliers to reduce production.
Then Apple for the first time since the release of the iPhone in 2007 reduced its revenue forecast. The next day, its shares fell 10%, and the company's market value lost $74 billion. Apple said it was not responsible for the incident, but decided to settle investor claims to avoid legal costs. The settlement covers investors who bought Apple shares in the two-month period between Cook's announcement and the earnings forecast cut. Over the past fiscal year, the company's net income was $97 billion—a settlement amounting to just under two days' profit.
Last June, Gonzalez-Rogers refused to dismiss the lawsuit. She found it plausible that Cook was talking about Apple's sales prospects rather than currency exchange rates; In her opinion, the company also knew that China's economy was slowing and demand could fall. The lead plaintiff was Norfolk County Council (UK), the governing body of the Norfolk Pension Fund. Since January 2019, Apple's share price has more than quadrupled—the company's market value now exceeds $2.6 trillion.
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