Apple Inc. (NASDAQ:AAPL) Shareholders accused the company and its CEO, Tim Cook, of lying regarding iPhone sales in China. A judge in Oakland agrees with the accusation and has directed that the company has to face a proposed shareholder’s class-action suit accusing Cook of concealing declined demand for iPhones in Chia, which resulted in billions of dollars in losses.
Apple concealed knowledge on declining sales in China
A decision by District Judge Yvonne Gonzalez Rogers on Wednesday said that shareholders led by UK-based pension can sue Cook over comments made on November 1, 2018, analysts call. Although there was sales pressure in emerging markets, the CEO said that he could not place China in that category. The company concealed knowledge about declining sales, and Judge Rogers found the statements of the CEO misleading and false, which gives shareholders grounds to sue.
A few days after the comments, the company told its suppliers to reduce production, and on January 2, 2018, it unexpectedly cuts quarterly revenue projection by around $9 billion. Cook blamed the decline on the pressure in the Chinese economy due to the US-China trade tensions. The cut in quarterly revenue was the first by Apple since the iPhone 7 in 2007. Apple stock dropped the following day following the forecast slash the following day, wiping up to $74 billion of the company’s market value.
Judge finds Apple and Cook culpable of misleading shareholders
In her decision, the Judge indicated that the plaintiffs had a “clear and compelling inference that Cook did not act innocently or with mere negligence.” Although he might not have been aware of specifics, this strains naivety that he will not have known the impact of trade tensions in Apple sales. The Judge said that COOK was aware of the risks when discussing China on the analyst’s call.
The Cupertino-based iPhone maker and Cook have indicated no proof of intent to commit fraud or defraud the plaintiffs. The Judge also dismissed other claims regarding the demand for iPhone XS and XS Max.