Apple has reached a $490 million settlement to resolve a class-action lawsuit that alleged Chief Executive Tim Cook misled investors about a steep downturn in iPhone’s sales in China that culminated in a jarring revision to the company’s revenue forecast.
A preliminary lawsuit settlement was filed on Friday with the U.S. District Court in Oakland, California, and requires approval by U.S. District Judge Yvonne Gonzalez Rogers.
Apple lawsuit settlement
The preliminary settlement filed Friday in Oakland, California, federal court stems from a shareholder lawsuit focused on the way Apple relayed information about how iPhone models released in September 2018 were performing in China, one of the company’s biggest markets.
Cook signaled that the new iPhones were off to a good start during an investor conference call in early November 2018, according to the complaint.
Cook had told investors on an November 1, 2018, analyst call that although Apple faced sales pressure in markets such as Brazil, India, Russia and Turkey, where currencies had weakened, “I would not put China in that category.”
That reassurance dissolved into a huge letdown on January 2, 2019 when Apple unexpectedly announced that the iPhone maker would slash its quarterly revenue forecast by up to $9 billion, blaming U.S. and China trade tensions.
Apple told suppliers a few days later to curb production.
Apple lowered revenue forecast
The lowered revenue forecast was Apple’s first since the iPhone’s launch in 2007. Apple shares fell by 10% the next day, wiping out $74 billion of market value.
Apple and its lawyers did not immediately respond to requests for comment on the ruling.
The Cupertino, California-based company denied liability, but settled to avoid the cost and distraction of litigation, court papers show.
What Apple shareholders will get?
Shawn Williams, a lawyer for the shareholders, called the Apple lawsuit settlement an “outstanding result” for the class. This includes shareholders who bought Apple shares in the two months between Cook’s comments and the revenue forecast.
Apple posted $97 billion of net income in its latest fiscal year, and its payout equals a little under two days of profit.
Last June, Rogers refused to dismiss the lawsuit.
She found it plausible to believe Cook had been discussing Apple’s sales outlook and not currency changes, and said Apple knew China’s economy was slowing and demand could fall.
The lead plaintiff is the Norfolk County Council as Administering Authority of the Norfolk Pension Fund, located in Norwich, England.
Lawyers for the shareholders may seek fees of up to 25% of the settlement amount.
Apple stock
Apple’s share price has more than quadrupled since January 2019, giving the company a more than $2.6 trillion market value.
The $490 million payment in lawsuit settlement represents less than 1% of the $97 billion net income profit that Apple pocketed during its fiscal year ended in September 2023. Apple shareholders who have held on to their shares have become wealthier too. Apple’s stock price has more than quadrupled from where it stood after Cook’s China warning, creating an additional $2 trillion in shareholder wealth.
