Apple Inc has agreed to a $490 million settlement to resolve a class-action lawsuit accusing CEO Tim Cook of misleading shareholders by not disclosing a decline in iPhone demand in China.
This agreement, pending approval by Judge Yvonne Gonzalez Rogers of the U.S. District Court in Oakland, California, follows Apple’s surprising reduction of its quarterly revenue forecast in January 2019 by up to $9 billion. The company attributed this cut to the trade tensions between the U.S. and China.
Despite challenges in several markets due to weakening currencies, Tim Cook assured investors in November 2018 that China was not affected, only for Apple to instruct suppliers to decrease production shortly thereafter.
This incident marked the first time Apple had to lower its revenue forecast since the introduction of the iPhone in 2007, leading to a significant 10% drop in Apple’s share value the following day, erasing about $74 billion in market capitalization.
Apple, based in Cupertino, California, has denied any wrongdoing but chose to settle to circumvent the burdensome costs and distractions of court proceedings.
The settlement is hailed as a significant achievement by Shawn Williams of Robbins Geller Rudman & Dowd, representing the shareholders.
It benefits investors who acquired Apple shares in the two months following Cook’s optimistic statements up to the revised revenue announcement.
Despite denying liability, Apple’s latest fiscal year report showed a net income of $97 billion, making the settlement amount relatively minor in comparison.
Last June, the court declined to dismiss the lawsuit, with Judge Rogers suggesting that Cook’s reassurances could have been misleading regarding the sales outlook in China, especially considering the known economic slowdown and potential for decreased demand in the region.
The primary plaintiff in this case is the Norfolk County Council, representing the Norfolk Pension Fund from Norwich, England.
The legal team for the shareholders may seek up to 25% of the settlement figure in fees.
Since the lawsuit’s inception, Apple’s market value has substantially increased, now exceeding $2.6 trillion, a testament to the company’s resilience and continued growth post-January 2019.
The case, officially known as In re Apple Inc Securities Litigation, is filed under the U.S. District Court for the Northern District of California, case number 19-02033.