Apple has agreed Friday to a settlement of $490 million in a class-action lawsuit that accused CEO Tim Cook of misleading investors regarding the declining demand for iPhones in China.
The preliminary settlement, filed in Oakland, California, stems from allegations that Cook's statements during an investor conference call in November 2018 did not accurately reflect the true state of iPhone sales in China.
iPhone Sales Letdown Spurs Investor Lawsuit Against Apple
(Photo : BRITTANY HOSEA-SMALL/AFP via Getty Images)
In September 2018, Cook initially voiced confidence in the latest iPhone models at that time, describing their performance as "very strong last quarter." However, shortly after, Apple instructed suppliers to decrease production.
Just a few months later, by January 2, 2019, Apple issued a revenue warning that shocked the investors.
In the statement, the company forecasted that its revenue for the quarter would fall significantly short of expectations, specifically a shortfall of $9 billion. This, according to the tech giant, was primarily due to weakening demand in China.
This announcement represents the first time Apple had revised its revenue forecast downward since the launch of the iPhone in 2007, according to AP News.
The sudden revision in revenue forecast resulted in a substantial drop in Apple's stock price, causing a loss of over $70 billion in shareholder wealth.
The lawsuit alleged that Apple failed to disclose the true extent of the decline in iPhone sales in China, leading to financial losses for investors.
Apple Settles Investor Lawsuit Over CEO's Alleged Deception
While Apple has denied allegations of Cook deceiving investors, it has agreed to the settlement to avoid the cost and distraction of prolonged litigation.
The settlement, which is subject to approval by US District Judge Yvonne Gonzalez Rogers in a hearing set for April 30, 2024, will compensate thousands of eligible shareholders who purchased Apple stock between November 2018 and January 2019.
The lead plaintiff in the case is the Norfolk County Council, representing the Norfolk Pension Fund in the UK Lawyers for the shareholders may seek fees of up to 25% of the settlement amount.
Despite the significant settlement payout, the $490 million represents less than 1% of Apple's $97 billion profit in its last fiscal year.
Additionally, since the announcement of the revenue forecast revision in January 2019, Apple's share price has more than quadrupled, resulting in substantial gains for shareholders.
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