Apple agreed to pay $490 million to settle a class-action lawsuit that claimed that the company’s chief executive, Tim Cook, was involved in deceiving shareholders by hiding information that iPhone sales had significantly decreased in the Chinese smartphone market.
The preliminary settlement agreement was filed on Friday, March 15, in the U.S. District Court in Oakland, California. This settlement agreement requires approval by U.S. District Judge Yvonne Gonzalez Rogers.
In January 2019, Apple made an unexpected announcement of its intention to slash its quarterly revenue forecast to $9 billion. The company claimed that this decision was made due to tensions in the area of trade relations between the United States and China.
In November 2018, Tim Cook told investors about the decline in smartphone sales of the company in the markets of several countries. In this context, he noted that the negative dynamic is associated with the weakening of national currencies. At the same time, Tim Cook did not mention the deterioration in sales figures in the Chinese market, although at that moment the technology giant was facing a drop in commercial results in the Asian country. A few days after that, the company recommended that suppliers reduce production volumes.
The mentioned lowered revenue forecast was the first for the tech giant since the iPhone debuted in 2007. After the revision of the outlook, the company’s share price showed a drop of 10%. The technology giant’s market value has been wiped out by $74 billion.
The Cupertino, California-based company has for a long period denied responsibility and any guilt in the context of Tim Cook’s reluctance to inform investors about Apple’s deteriorating state of affairs in the Chinese smartphone market. At the same time, the tech giant decided to settle the lawsuit. In this case, the company sought to avoid the costs and distraction of litigation.
Shawn Williams, a partner at Robbins Geller Rudman & Dowd representing shareholders, called the settlement an outstanding result.
The settlement agreement applies to investors who bought the tech giant’s securities in the period between Tim Cook’s statements and the revenue outlook.
Apple’s net income for the last fiscal year was $97 billion. The payment under the settlement agreement amounts to just under two days of the tech giant’s profit.
The shareholders’ lawyers may seek fees of up to 25% of the settlement amount. The value of the tech giant’s securities has more than quadrupled since January 2019. The company’s market value has exceeded the $2.6 trillion mark.
It is worth noting that currently there is also a decrease in consumer interest in the iPhone in the Chinese smartphone market. In September last year, sales of the 15th generation of this device were launched. Since then, such a number of units of the mentioned smartphone have been sold in China, which is 30% less than the same indicator of the iPhone 14 for the same period in 2022. The relevant information was contained in an analytical note by Jefferies, published in early January.
