Apple agrees to settle $490 million class-action lawsuit accusing CEO of defrauding shareholders
Apple has reached a settlement agreement in a class-action lawsuit, agreeing to pay $490 million to resolve allegations that CEO Tim Cook misled shareholders about declining iPhone demand in China.
The preliminary settlement, filed with the U.S. District Court in Oakland, California, awaits approval from Judge Yvonne Gonzalez Rogers.
The lawsuit originated from Apple's unexpected announcement on Jan. 2, 2019, when it revealed a significant reduction in quarterly revenue forecasts, citing U.S.-China trade tensions. The announcement contradicted Cook's earlier reassurances to investors on Nov. 1, 2018, about China's market stability.
Cook had notably stated during an analyst call that although Apple faced sales pressure in various markets due to currency fluctuations, China was not one of them. Instead, the countries he listed were Brazil, India, Russia, and Turkey.
However, a few days later, Apple instructed suppliers to reduce production, an announcement that marked Apple's first revenue forecast downgrade since the launch of the iPhone in 2007. Following the news, Apple's shares plummeted by 10%, resulting in a loss of $74 billion in market value the following day.
While Apple denies wrongdoing, it opted to settle to avoid prolonged legal battles. Shawn Williams, representing the shareholders, hailed the settlement as a significant victory.
The settlement encompasses investors who acquired Apple shares between Cook's statements and the revenue forecast adjustment.
Apple posted $97 billion of net income in its latest fiscal year, so the settlement is an insignificant fraction of its profit – less than two days of earnings.
Judge Rogers previously rejected Apple's attempt to dismiss the lawsuit, finding merit in the claim that Cook's statements misrepresented Apple's sales outlook amidst China's economic slowdown.
Lawyers for the shareholders may seek fees of up to 25% of the settlement amount.
Despite the legal setback, Apple's stock has surged since 2019, propelling its market value to over $2.6 trillion.
