Apple to pay $490m to settle allegations that it misled investors about iPhone sales in China
Apple has agreed to pay $490 million to settle a class-action lawsuit that alleges CEO Tim Cook misled investors about a significant downturn in iPhone sales in China, which led to a stark revision of the company's revenue forecast.
The preliminary settlement, filed on Friday in a federal court in Oakland, California, originates from a shareholder lawsuit centred on how Apple communicated information about the performance of iPhone models released in September 2018 in China, one of the company's largest markets.
According to the complaint, Cook indicated that the new iPhones were off to a promising start during an investor conference call in early November 2018. However, this reassurance evaporated into a major disappointment on January 2, 2019, when Cook issued a warning that Apple's revenue for the recently completed quarter would fall $9 billion short of management's forecast for the period. Moreover, almost all of the sales drop was attributed to weak demand in China.
This marked the first time Apple had reduced its revenue guidance since the iPhone's launch in 2007 and triggered a 10% plunge in its stock price in the following day of frantic trading, erasing more than $70 billion in shareholder wealth.
Apple strongly denied that Cook deceived investors about iPhone sales in China between early November and early January. The Cupertino, California-based company maintained this stance in the settlement documents but stated it decided to make the payment after more than four years of legal disputes to avoid an "overly burdensome, expensive, and distracting" hassle.
The settlement was reached through a mediator after U.S. District Judge Yvonne Gonzalez Rogers rejected Apple's request to dismiss the case and set a trial date for September 9.
Gonzalez Rogers is now being asked to approve the settlement in a hearing scheduled for April 30.
Thousands of shareholders who purchased Apple stock in late 2018 could be eligible for a portion of the settlement, which will be distributed from a pool that will be less than $490 million after the lawyers involved in the case are paid. The attorneys plan to seek up to a quarter, or about $122 million, of the settlement.
The $490 million payment represents less than 1% of the $97 billion profit that Apple made during its last fiscal year, which ended in September. Apple shareholders who have retained their shares have also become wealthier. Apple's stock price has more than quadrupled from where it stood after Cook's China warning, generating an additional $2 trillion in shareholder wealth.
By RSS/AP
