Tech giant Apple has agreed to a settlement amounting to $490 million to resolve a class-action lawsuit. The lawsuit, which accused Apple Chief Executive Tim Cook of concealing declining iPhone demand in China, has been a subject of contention within the shareholder community.
The preliminary settlement, filed on Friday at the U.S. District Court in Oakland, California, awaits approval from U.S. District Judge Yvonne Gonzalez Rogers. The case originated from Apple’s unexpected announcement on January 2, 2019, when the company revealed plans to reduce its quarterly revenue forecast by up to $9 billion, citing escalating trade tensions between the United States and China, Reuters news report said.
Tim Cook’s reassurances to investors during a November 1, 2018, analyst call, where he suggested that China’s market was not facing significant pressure, have come under scrutiny. Despite Tim Cook’s optimism, Apple directed suppliers to scale back production shortly afterward.
The subsequent revenue forecast adjustment marked a significant departure for Apple, as it was the first since the iPhone’s launch in 2007, resulting in a substantial decline in Apple’s stock value by 10 percent the following day, erasing $74 billion in market capitalization.
Apple, headquartered in Cupertino, California, has maintained its denial of liability in the matter. However, court documents reveal that the company opted to settle to avoid prolonged legal proceedings and associated distractions.
Shawn Williams, representing the shareholders, hailed the settlement as a favorable outcome for the affected class, encompassing shareholders who acquired Apple shares in the two-month period between Tim Cook’s remarks and the revenue forecast alteration.
The settlement amount, while substantial, represents a fraction of Apple’s recent financial performance, with the company reporting a net income of $97 billion in its latest fiscal year. The payout equates to a little over two days of the company’s profit.
The legal battle faced hurdles last June when Judge Gonzalez Rogers declined to dismiss the lawsuit, finding merit in the argument that Tim Cook’s discussions pertained to Apple’s sales outlook rather than mere currency fluctuations. The lead plaintiff in the case is the Norfolk County Council, acting as the Administering Authority of the Norfolk Pension Fund, based in Norwich, England.
Notably, lawyers representing the shareholders may seek fees of up to 25 percent of the settlement amount. Despite the legal entanglements, Apple’s share price has soared, more than quadrupling since January 2019, catapulting the company’s market value to over $2.6 trillion.
