What you need to know
- Apple is being sued by shareholders.
- It's over claims that Tim Cook and Apple allegedly concealed the falling demand for iPhones, costing shareholders billions.
- A judge has ruled that the suit can go ahead.
A judge has ruled that Apple can be sued by its shareholders over comments made by Tim Cook on an investor call in November of 2018.
A federal judge said Apple Inc (AAPL.O) must face part of a lawsuit claiming it fraudulently concealed falling demand for iPhones, especially in China, leading to tens of billions of dollars in shareholder losses.
While dismissing most claims, U.S. District Judge Yvonne Gonzalez Rogers ruled late Tuesday that shareholders can sue over Chief Executive Tim Cook's comments touting strong iPhone demand on a Nov. 1, 2018 analyst call, only a few days before Apple told its largest manufacturers to curb production.
In a ruling yesterday, the judge said it was "simply implausible" that absent some kind of disaster, CEO Tim Cook would not know that demand for the iPhone in China was falling "mere days before cutting production lines". It is also suggested that Apple's decision to stop reporting iPhone sales "plausibly suggests that the defendants expected unit sales to decline."
The complaint is led by the Employees' Retirement System of the State of Rhode Island, and was launched after Apple drastically cut its revenue forecast in January of last year:
The complaint, led by the Employees' Retirement System of the State of Rhode Island, came after Cook on Jan. 2, 2019 unexpectedly reduced Apple's quarterly revenue forecast by up to $9 billion, in part because of U.S.-China trade tensions.
It was the first time since the iPhone's 2007 launch that the Cupertino, California-based company had cut its revenue forecast. Apple stock fell 10% the next day, erasing $74 billion of market value.
Cook had said on the analyst call that the iPhone XS and XS Max had a "really great start," and that while some emerging markets faced downward sales pressures "I would not put China in that category."
The case is being heard in the Northern District of California.