Apple faces litigation over shareholders’ losses
A U.S. district court in California Wednesday ordered Apple Inc to face a proposed class-action lawsuit by shareholders who lost billions of dollars as a result of fall in demand of iPhones in China.
The investors are accusing Chief Executive Tim Cook of concealing the fact to make them take the fatal venture.
Judge Yvonne Gonzalez Rogers ruled that shareholders led by a UK pension fund can sue because Mr. Cook had on November 1, 2018 said during an analyst call that while Apple was facing sales pressure in some emerging markets, “I would not put China in that category.”
Apple however told suppliers to curb production a few days after Mr. Cook spoke, and on Jan. 2, 2019, unexpectedly cut its quarterly revenue forecast by up to $9 billion, which Mr. Cook blamed in part on pressure on China’s economy from the U.S.-China trade tensions.
The lowered revenue forecast was the first by Cupertino, California-based Apple since the iPhone’s launch in 2007. Shares of Apple fell 10 per cent the next day, erasing $74 billion of market value.
Apple and Mr. Cook have said there was no proof they defrauded or intended to defraud the plaintiffs. The company did not immediately respond on Thursday to requests for comment.
In a 23-page decision, Ms. Rogers said shareholders plausibly alleged that Mr. Cook’s statements on the analyst call about China were materially false and misleading.
She said that while Mr. Cook might not have known specifics about “troubling signs” in China that the company had begun seeing, it “strains credulity” he would have been in the dark about the trade tensions and their possible impact on Apple.
The plaintiffs raised a “strong inference” that Mr. Cook knew about the risks when discussing China on the analyst call, and a “cogent and compelling inference that Cook did not act innocently or with mere negligence,” Ms. Rogers wrote.
Ms. Rogers, who works in Oakland, California, also dismissed claims related to demand for the iPhone XS and XS Max.
The plaintiffs are led by the Norfolk County Council as Administering Authority of the Norfolk Pension Fund, located in Norwich, England.
The case is in re: Apple Inc Securities Litigation, U.S. District Court, Northern District of California, No. 19-02033.
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