The class action lawsuit accusing Tim Cook of misleading investors over falling sales in China has been settled for half a billion dollars.
It’s now almost six years since Tim Cook confirmed in a late 2018 earnings call that there were countries where iPhone sales were down, but “I would not put China in that category.” However, within days of the call, Apple allegedly then told suppliers to reduce production.
Then in early 2019, Apple took the unusual step of revising its revenue guidance down because of lower iPhone sales in China.
As leader of the class action suit, the UK’s Norfolk County Council, alleges that Cook and Apple should have foreseen the economic downturn that so affected its sales of the iPhone in the region. Consequently, the suit argued that Cook deliberately withheld pertinent information, leading to investors losing billions of dollars as the stock dropped by $74 billion.
According to Reuters, Apple has settled. Apple has agreed to pay $490 million to investors who bought shares between Cook’s comments and Apple’s subsequent revision of its guidance.
Apple’s position throughout was that Cook’s comments were solely a statement of opinion. Apple’s lawyers have previously argued that the lawsuit “fails to plead any actionably false or misleading statement.”
Nonetheless, in 2020, US District Judge Yvonne Gonzalez Rogers agreed a lawsuit could be filed. She said that Apple’s argument Tim Cook was unaware of an impact on China sales “strains credulity.” In 2022, the lawsuit then officially gained class action status.
Apple next attempted to get the lawsuit overturned in 2023, but Judge Gonzalez summarized the company’s arguments as “distortions.”
The $490 million payout
A preliminary settlement of $490 has been filed with the court, and must be approved by Judge Gonzales. According to Reuters, lawyers representing the shareholders may seek fees of up to $122 million.
In total, Cook’s eight-word comment has cost Apple around $61 million per word. It’s also 7.8 times Tim Cook’s official annual salary of $63.2 million for fiscal year 2023. Then based on the EverySecond site, the $490 million fine is equal to about 16 hours of Apple sales.
Consequently, given that Cook led Apple into becoming the first company to reach a $2 trillion market cap, he’s unlikely to be facing a frosty HR interview.
However, the point is that he won’t be facing a judge any more, either. Apple continues to deny any liability, and says that the settlement is to avoid the cost and distraction of a trial.
As to whether Cook lied or not, Apple of course continues to say that he didn’t. Shareholders have maintained that he did, and so now their representative — Shawn Williams of Robbins Geller Rudman & Dowd — has described the settlement as an “outstanding result”.
The fact that Apple cut supply orders within days of the earnings call in question does raise questions about how promptly the company did — or could have — reacted to falling sales.
Yet Apple’s earnings calls are always retrospective, with as little forward-looking statements as the company can get away with. So it seems unlikely that Cook intentionally misled the investors.
This story originally appeared on Appleinsider
