Apple has reached a settlement of $490 million to resolve a class-action lawsuit that accuses CEO Tim Cook of deceiving investors regarding a significant decline in iPhone sales in China, resulting in a sudden adjustment to the company’s revenue prediction.

On Friday, a preliminary agreement was submitted to the federal court in Oakland, California. This was a result of a lawsuit filed by shareholders regarding the way Apple communicated details about the performance of iPhone models released in China in September 2018, which is a major market for the company.

According to the complaint, Cook reported during an investor conference call in early November 2018 that the new iPhones had a successful beginning.

That reassurance dissolved into a huge letdown on Jan. 2, 2019 when the Cook issued a warning that Apple’s revenue for the just-completed quarter would fall $9 billion below management’s forecast for the period. What’s more, virtually all of the sales drop was traced to weak demand in China.

This was the first instance of Apple reducing its projected earnings, a move not seen since the launch of the iPhone in 2007. This led to a drastic 10% drop in the stock price and caused frenzied trading, resulting in a loss of over $70 billion for shareholders.

Apple adamantly denied accusations that CEO Cook intentionally misled investors about the iPhone’s sales in China from November to January. The company, based in Cupertino, California, stood by this position in the settlement papers, but stated that it ultimately chose to pay after four years of legal disputes to prevent a “excessively difficult, costly, and distracting” ordeal.

The resolution was achieved with the help of a mediator, following the denial of Apple’s motion to dismiss the case by U.S. District Judge Yvonne Gonzalez Rogers. A trial date of September 9 was then set.

Rogers is currently being requested to approve the agreement during a hearing set for April 30th.

Many investors who purchased Apple shares in the latter part of 2018 may qualify for a portion of the settlement. The distribution will come from a pool of less than $490 million, after the lawyers involved in the lawsuit receive their share. The attorneys aim to receive up to 25% of the settlement, equivalent to around $122 million.

The payment of $490 million is equivalent to less than 1% of Apple’s $97 billion profit from their previous fiscal year that ended in September. Shareholders of Apple who have retained their shares have also experienced an increase in wealth. The stock price of Apple has increased by more than four times since Cook warned about China, resulting in an added $2 trillion in shareholder wealth.

Source: wral.com