On Tuesday, a judge ruled that Apple must face parts of a lawsuit accused of fraudulently concealing weak demand for the iPhone in the fall of 2018,media reported. The lawsuit is understood to revolve around “misleading” statements by Apple executives , including comments made by chief executive Tim Cook in 2018 that led to a perceived jump in the share price.
When Apple issued its revenue guidance in January 2019, the share price fell, causing significant losses to shareholders.
U.S. District Judge Yvonne Gonzalez Rogers has reserved Apple shareholders’ right to sue the company for false statements about the strong demand for the iPhone, Reuters reported, although she dismissed most of the charges in the lawsuit.
“Without natural disasters or other human factors, it’s hard to believe that Cook didn’t know that Chinese demand for the iPhone was declining in the days leading up to the cut,” Rogers wrote. She added that “it is hard to believe that Cook does not understand China’s emerging market problems, although the company acknowledges that there are worrying signs during this period”.
In addition, Rogers said Apple’s decision to stop reporting iPhone sales appears to be a reasonable indication that iPhone sales are expected to decline.
However, on a conference call, Mr Cook said the current iPhone model had a “very good start” and denied that some markets, such as China, were under sales pressure.
The lawsuit was filed in u.S. District Court for the Northern District of California after the January 2019 income adjustment mentioned above. Although it was initiated by Employees’ Retirement System in Rhode Island, it represents all shareholders.
By mid-November 2019, Apple had instructed assembly partners Foxconn and Hutchison to cut production of the new iPhone and significantly reduce shipments, the indictment said.
In January 2019, Apple released a rare revised version of its revenue guidance, cutting its first-quarter forecast to $84 billion from an initial $89 billion. In a letter to shareholders, Mr. Cook said revenue was lower than expected, particularly in China, and that was why.
Apple’s shares fell 10 per cent at one point after this correction, but by the end of January they had almost recovered.