Apple reaches $490 million settlement over Tim Cook's China demand comments

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Apple Inc agreed to pay $490 million to settle a class-action lawsuit accusing Chief Executive Tim Cook of misleading investors by exaggerating demand for iPhones in China in 2018.

Investors claimed Cook overstated demand for Apple products in China during a November 2018 earnings call, sending the company's stock price down nearly 10% in January 2019, when the company said it would miss revenue expectations. $9 billion.

Apple declined to comment on Friday. It denies violating U.S. securities laws.

The settlement still needs to be approved by the California federal judge overseeing the case. It would mark Apple's largest U.S. securities fraud class action settlement, according to Deutsche Börse's Institutional Shareholder Services.

The years-long securities lawsuit, led by Britain's Norfolk County Council, comes after Apple issued a rare and unexpected warning about sales in China in January 2019. This is the first time in 16 years that Apple has lowered its revenue forecast, causing its stock price to fall.

At the time, China's overall economic growth was slowing due to its trade war with the U.S. administration of Donald Trump. Investors suing Apple claim Cook downplayed concerns about China, citing the region's “strong” performance in the latest quarter.

They further allege that Cook exaggerated the success of new iPhone models on the same conference call, only to begin cutting production days later.

The settlement highlights the legal risks companies face when issuing revenue guidance. Apple has yet to provide formal guidance in its quarterly earnings statements since the Covid-19 pandemic hit, and its overall disclosure approach has drawn some criticism for a lack of transparency with investors.

Last month, Apple's two largest shareholders backed a motion requiring the company to disclose more details about its work in artificial intelligence and the risks that arise from it. The motion failed.

Nicholas Rodelli of CFRA Research said of Apple's decision to stop disclosing iPhone sales: “Apple's disclosure practices have become increasingly opaque, and we rate it the worst among the major technology platforms in terms of quality of disclosures. .” 2018.

Gene Munster of Deepwater Asset Management said he was surprised by Apple's decision to resolve the case, given that companies typically comment on market trends. Such lawsuits further discourage companies like Apple from providing forward guidance, he said: “I think at the end of the day it's a win for a few investors and a loss for the market as a whole.”

The settlement comes as Apple once again faces uncertainty over iPhone sales in China due to geopolitical tensions between the United States and China and growing smartphone competition from Huawei.