A class action complaint has been filed against Apple Inc., alleging that CEO Tim Cook misled investors by hiding the fact that iPhone sales were declining in China. The complaint, spearheaded by a British pension fund, claims that Cook misled investors about Apple’s sales in China in a comment he made on an analyst call in November 2018. The case and its potential effects on Apple’s stock price are discussed in this article.
On November 1, 2018, on an analyst call, Apple CEO Tim Cook expressed anxiety about the company’s sales prospects in China. Cook said China was not affected by the sales pressure seen in other regions due to weak currencies. However, on January 2, 2019, Apple unexpectedly lowered its quarterly revenue prediction by up to $9 billion, blaming U.S.-China trade tensions. This news came just days after Apple informed its suppliers to restrict manufacturing. Apple’s stock dropped by 10% the day after the announcement was made.
According to the class action lawsuit, Apple lost $74 billion in market value in one day because of Cook’s misleading comment. Norfolk County Council as Administering Authority of the Norfolk Pension Fund, headquartered in Norwich, England, is the primary plaintiff, and it is suing Apple for damages related to the company’s failure to disclose risks related to its sales outlook in China.
Apple’s request to have the lawsuit against Tim Cook dismissed was denied by U.S. District Judge Yvonne Gonzalez Rogers. In his opinion, jurors could conclude from Cook’s comments that he was discussing Apple’s sales prospects in China, not only previous performance or the impact of currency changes. In addition, the judge pointed out that Apple was aware of China’s deteriorating economy and statistics indicating potential demand decline. Shareholders may have been harmed by the company’s failure to disclose these risks.
As a result of the class action lawsuit, Apple may have to pay out a lot of money in damages. Apple’s market cap has increased by approximately $3 trillion since January 2019. The lawsuit’s conclusion, however, is still up in the air and may affect Apple’s brand and ability to make business decisions in the future.
First reported on Reuters
