Tim Cook was accused of lying about the iPhone’s falling demand in China which led to a $70 billion loss in shareholders’ wealth
A class action lawsuit was filed by the shareholders against Cook which was settled on Friday for $490 million
A settlement approval hearing is scheduled for April 30
Apple is set to pay a whopping $490 million to settle a class action lawsuit that accused Chief Executive, Tim Cook, of lying to the shareholders and concealing the fact that the demand for iPhones has been falling in China.
This had a huge impact on Apple’s stocks which fell by 10% and the investors ended up losing $70 billion.
China is one of the biggest markets for the company. However, in the past couple of years, the company has experienced a consistent decrease in demand.
A new iPhone model was launched in China in September 2018. And just two months later in November, Cook hopped on a call with the investors and told them that the product was off to a good start.
In fact, he further added that demand for iPhones fell in Brazil, India, Russia, and Turkey due to their weakening currencies. Cook assured the shareholders that China was not on the list.
However, their revenue expectations were shattered when Cook announced in January 2019 that the final revenue for the quarter would be at least $9 billion less than the forecasted revenue.
A little digging revealed that the biggest reason behind this sharp decrease in revenue was the falling demand for iPhones in China.
Read more: Apple loses $200 billion after China reportedly bans iPhones at government offices
What Did Apple Have to Say about These Accusations?
Apple and Tim Cook have maintained their stance that they didn’t deceive the investors.
The company initially filed a plea to dismiss the case but that was rejected by the U.S. District Judge Yvonne Gonzalez Rogers who set September 9 as the trial date. In order to avoid more litigation costs, the company decided to settle for $490 million.
A preliminary settlement was filed in the U.S. District Court in Oakland, California, and will require approval by Gonzalez Rogers. The settlement approval hearing is scheduled for April 30.
Apple and its legal team have not been available for comment since the settlement was reached.
Shawn Williams, a partner at Robbins Geller Rudman & Dowd (the law firm that represents the shareholders) rejoiced with this news. He called it an “outstanding result” for the group.
It’s hard to calculate how much each shareholder will receive. Out of the $490 million, the lawyers and other legal costs will take a significant cut. As per reports, the attorneys are planning to take 1/4th of the total settlement i.e. $122 million.
It’s important to note that only those shareholders who bought stocks in the two months between Tim Cook’s comments about sales in China and the actual revenue report will be eligible for compensation.
Although it’s a significant settlement, it won’t affect the company’s financial standing in any way. That’s because, in the last fiscal year that ended in September, the company bagged a total revenue of $97 billion and the compensation is less than 1% of its total revenue last year.
Also, long-term Apple shareholders won’t be too concerned because the dip in Apple’s stock prices was only temporary. The share prices have almost quadrupled in the last couple of years, adding more than $2.6 trillion to shareholders’ wealth.
Read more: iPhone tops China smartphone sales despite setbacks
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