Under 100 Words: A Compact Summary
Apple settled a class-action lawsuit for $490 million, alleging CEO Tim Cook misled investors about iPhone sales in China. The settlement follows a tumultuous period, including a sharp revenue warning and legal battles, with shareholders potentially receiving compensation from the settlement pool. Apple’s profitability and stock value soared despite the litigation (China Hits Apple with $490 Million Penalty).
- Apple has consented to a payment of $490 million to resolve a class-action lawsuit accusing CEO Tim Cook of deceiving investors regarding a significant decline in iPhone sales in China, leading to a sudden adjustment in the company’s revenue forecast (China Hits Apple with $490 Million Penalty).
- The preliminary settlement, submitted on Friday in federal court in Oakland, California, originates from a shareholder lawsuit concerning Apple’s communication of the performance of iPhone models released in September 2018 in China, a key market for the company.
- According to the complaint, during an investor conference call in early November 2018, Cook indicated that the new iPhones had begun well (China Hits Apple with $490 Million Penalty).
- On January 2, 2019, the reassurance provided earlier dissolved into a significant disappointment when Cook issued a warning that Apple’s revenue for the recently completed quarter would fall $9 billion below management’s forecast, with the majority of the sales drop attributed to weak demand in China.
- This marked the first instance of Apple reducing its revenue guidance since the release of the iPhone in 2007, leading to a 10% plunge in its stock price the following day, wiping out over $70 billion in shareholder wealth amidst frenetic trading.
- Apple vehemently denied allegations that Cook misled investors regarding iPhone sales in China between early November and early January (China Hits Apple with $490 Million Penalty).
- The company, headquartered in Cupertino, California, maintained this position in the settlement documents. However, Apple stated that it opted to make the payment after more than four years of legal disputes to avoid a burdensome, expensive, and distracting legal battle.
- The settlement was achieved through a mediator after US District Judge Yvonne Gonzalez Rogers denied Apple’s request to dismiss the case and scheduled a trial date for September 9. Gonzalez Rogers is now tasked with approving the settlement, with a hearing scheduled for April 30 (China Hits Apple with $490 Million Penalty).
- Thousands of shareholders who purchased Apple stock in late 2018 may qualify for a portion of the settlement, which will be distributed from a pool that will be less than $490 million after the attorneys involved in the case are compensated. The lawyers intend to request up to one-fourth of the settlement, approximately $122 million.
- The $490 million payment constitutes less than 1% of the $97 billion profit that Apple accumulated in its last fiscal year ending in September (China Hits Apple with $490 Million Penalty).
- Shareholders who retained their shares have also experienced increased wealth. Apple’s stock price has surged more than fourfold from its level following Cook’s warning about China, generating an additional $2 trillion in shareholder wealth.
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