Apple to settle class action for $490 million after Tim overcooked China outlook
- Reference: 1710829925
- News link: https://www.theregister.co.uk/2024/03/19/cook_apple_settlement/
- Source link:
A court document filed last Friday details a [1]settlement [PDF] pending approval before a Northern District of California judge.
The incident dates back to late 2018 when, during an Apple earnings call, Cook stated that China – unlike Brazil, India, Russia and Turkey – was not one of the markets where Apple faced sales pressure due to weakened currency.
[2]
"In relation to China specifically, I would not put China in that category. Our business in China was very strong last quarter. We grew 16 percent, which we're very happy with. iPhone in particular was very strong. Very strong double-digit growth there," Cook said, according to a [3]transcript of his remarks.
[4]
[5]
That utterance was an expensive mistake.
The shareholder class action, led by Norfolk County Council as Administering Authority of the Norfolk Pension Fund, considered the remarks deceptive, given Apple cut supplier production in China just four days after the call. And by early 2019, Apple again trimmed its forecasts by between $5 billion and $9 billion on the back of deteriorating economic conditions in China.
[6]
"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad," [7]explained Cook.
He added that China's economy began to slow in the second half of 2018, with the September quarter producing the second lowest GDP in 25 years.
[8]PC 'price hike' coming as cost of memory soars – analysts
[9]No App Store needed: Apple caves, will allow sideloading in EU
[10]Apple Vision Pro rentals take China by storm ahead of official release
[11]Duo face 20 years in prison over counterfeit iPhone scam
According to court documents, defendants alleged that Cook made "materially false and misleading statements and omissions about demand for the newly released iPhones and Apple's business in China."
"This $490 million recovery is not just an outstanding result for investors who purchased their Apple securities during the two-month class period, it is a testament to the perseverance of the lead plaintiff, the UK's Norfolk Pension Fund, in pursuing the action to the brink of trial," [12]stated Robbins Geller Rudman & Dowd LLP partner Shawn A Williams, who served as lead counsel for investors.
According to the law firm, the settlement will be the third-largest securities class action recovery ever in the Northern District of California – a district that's home to plenty of tech giants.
[13]
Apple's settlement – which ends four years of litigation efforts – is not an admission of liability.
"Defendants have expressly denied and continue to deny that they have violated the federal securities laws or any other laws, or have otherwise misled investors as alleged in this Action, but in recognition that further litigation will be protracted, overly burdensome, expensive, and distracting, have determined that it is desirable and beneficial for them to resolve the Action," court documents state.
The fruit cart sought – and [14]failed – to have the case dismissed last June. ®
Get our [15]Tech Resources
[1] https://regmedia.co.uk/2024/03/19/apple_tim_cook_comments_settlement.pdf
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZflwRkHegN1th4caYXaI2wAAAVI&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://www.fool.com/earnings/call-transcripts/2018/11/01/apple-inc-aapl-q4-2018-earnings-conference-call-tr.aspx
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZflwRkHegN1th4caYXaI2wAAAVI&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZflwRkHegN1th4caYXaI2wAAAVI&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZflwRkHegN1th4caYXaI2wAAAVI&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.apple.com/sg/newsroom/2019/01/letter-from-tim-cook-to-apple-investors/
[8] https://www.theregister.com/2024/01/11/pc_price_hike_coming_as/
[9] https://www.theregister.com/2024/03/12/apple_update_eu_devs_can_distribute_from_websites/
[10] https://www.theregister.com/2024/02/27/china_apple_vision_pro_rentals/
[11] https://www.theregister.com/2024/02/21/counterfeit_iphone_scam/
[12] https://www.rgrdlaw.com/news-item-Robbins-Geller-Secures-490-Million-Securities-Fraud-Recovery-from-Apple.html
[13] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZflwRkHegN1th4caYXaI2wAAAVI&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[14] https://www.reuters.com/legal/apple-fails-end-lawsuit-over-china-sales-comment-by-ceo-cook-2023-06-27/
[15] https://whitepapers.theregister.com/
Harsh judgment
Slight ambiguity in Cook’s words since it was not 100% clear his reference to double-digit growth referred specifically to past performance, although that followed from what he had already said.
To say he meant future growth is a tortured interpretation which investors happily allowed themselves to go along with.
But this is why lawyers draft listing documents with pages and pages of “risk factors’ which basically say “If you buy these shares you are mad.’
I believe this primarily impacted investors who were interested in the China outlook, and made their investment decisions accordingly.
The article does state that the action refers solely to the groups who bought shares in Apple in the two months after that statement.
So basically it applies to people who took Cook at his word (what other choice did they have) that all was rosy in the Walled Garden in regards to China. If just 4 days later, they cut production, then it seems pretty clear they knew that things behind the Great Wall were not so good. So yep Cook was blatantly bullsh&tting, and he's been called out on it.
"the UK's Norfolk Pension Fund"
Could that section of the commentariat which believes that justice stops at national boundaries please take a few moments to reflect.
Re: "the UK's Norfolk Pension Fund"
American company, sued in an American court, for actions in America. The fact that the shareholder is domiciled overseas has no bearing on the matter. If it were otherwise, international investment would cease.
Re: "the UK's Norfolk Pension Fund"
How else would you expect it to be done? The same kind of thing is done by the EU's representation in the US over GDPR.
There are those who would argue that this couldn't have been done by a UK pension fund, as if they thought the Dukes of Hazzard escaping by crossing the county line was legally correct advice instead of a plot device.
Sour Grapes are a Gripe when Local Apples are Treated Better than Imported Oranges
Is [1]Mike Lynch facing 20 years in jail for something similar regarding Hewlett Packard’s expectations of Autonomy following a devastating change in market engagement?
[1] https://www.theregister.com/2024/03/18/autonomy_mike_lynch_us_trial/
Re: Sour Grapes are a Gripe when Local Apples are Treated Better than Imported Oranges
There was far more than a passing comment concerning Autonomy's accounts (allegedly).
The world of stock markets is based on statistics, opinions and whispers and, occasionally, facts. That's why there are laws concerning financial declarations that obfuscate the facts.
So was the phrase "We grew 16 percent" factually incorrect?
It's not often I side with Apple but this does seem to be nit picking over words. Expensive words.