What you need to know
- Apple board members are being sued.
- It's because of Apple's Q1 2019 guidance.
- Apple had to revise its initial guidance for the quarter.
Apple's board members are being sued relating to the company's Q1 2019 guidance for the fourth time, according to a report. Patently Apple (via 9to5Mac) says that lawsuit accuses them of breach of fiduciary duty.
Apple initially offered guidance for Q1 2019 of between $89 billion and $93 billion. But it later had to revise that down to around $84 billion. The new guidance proved to be correct, with Apple landing on $84.3 billion revenue for the quarter. Apple blamed several factors including users upgrading iPhones more slowly than anticipated.
However, a new lawsuit joins three others which accuse Apple's board members of violating federal securities laws by misrepresenting the company's position when the original guidance was made public.
This is a shareholder derivative action brought in the right, and for the benefit, of Apple against certain of its officers and directors seeking to remedy Defendants' violations of state and federal law that have occurred from August 1, 2017, through January 2, 2019 (the "Relevant Period"), and have caused, and continue to cause, substantial harm to Apple, including monetary losses and damages to Apple's reputation and goodwill […]During the Relevant Period, the Defendants misrepresented and/or failed to disclose multiple material factors that negatively impacted Apple's iPhone sales and revenues, including that, inter alia: (a) consumer demand for new iPhone models was negatively impacted by Apple's sales of heavily discounted battery replacement program for older iPhone models, as customers chose not to upgrade or to delay same; (b) macroeconomic factors, including an escalating trade war with the United States, increased competition from cheaper smartphones, and sluggish economy, were likely to negatively affect, and were doing so, Apple's iPhone sales in China; and (c) that as a result of the foregoing, the Defendants lacked a reasonable basis when issuing positive iPhone sales and revenue guidance for the first quarter of 2019, and when publicly denying the existence and negative impact of the foregoing
Ultimately the lawsuits accuse Apple's board members of making Apple look silly by having to revise its guidance. And as a result of that, its stock price fell. One shareholder, John Votto, claims he is suing Apple's board members on behalf of Apple, Inc.
