Small talk, big price tag. $490 million big. Reuters reports that Apple is settling a shareholder lawsuit about the company reversing course after some 2018 comments by CEO Tim Cook about sales projections for China.
Apple said sales in the country were fine despite worsening conditions in other emerging-market countries. But it turned out that sales in China were not fine. The company said in a note to investors a few months later that in-store traffic was indeed slowing down.
“External forces may push us around a bit, but we are not going to use them as an excuse. Nor will we just wait around until they get better,” Cook wrote. “This moment gives us an opportunity to learn and to take action, to focus on our strengths and on Apple’s mission.”
The stock price went down by 10% the next day, and investors lost money — $74 billion of the company’s market value vanished in the process.
Chinese sales deteriorated amidst a trade war that then-President Donald Trump started with the country, a strengthening U.S. dollar that made American exports more expensive abroad, and a cooling Chinese economy — GDP growth was reported at 6.6% in 2018, its slowest pace in three decades. The original complaint, a class-action suit initiated by the retirement fund for city employees of Roseville, California, said that:
Notwithstanding the impact of slowing economic growth in China, geopolitical pressures caused by U.S.-China sales tariffs, and the Company’s ability to compel unnecessary iPhone upgrades on customers, Apple issued a series of materially false and misleading statements in November 2018 concerning demand for iPhones and Apples pricing power for its hardware offerings, including its new iPhones launched in September 2018, in particular in China.
The proposed settlement, filed Friday and still awaiting a judge’s approval, suggests that the plaintiffs’ attorneys would have pursued $2.1 billion in damages absent an agreement. Jury selection had been scheduled to begin in September.
Apple denied any wrongdoing as part of the settlement, but “nonetheless, Defendants have concluded that after four years of litigation, further litigation will be protracted, overly burdensome, expensive, and distracting.” Hence, the checkbook coming out.
Apple stock is up more than 330% since the day that 2019 memo went out.