Become a MacRumors Supporter for $25/year with no ads, private forums, and more!

MacRumors

macrumors bot
Original poster
Apr 12, 2001
54,673
16,847


U.S. federal judge Yvonne Gonzalez Rogers this week ruled that a class action lawsuit accusing Apple of fraudulently concealing weakening demand for iPhones between August 2017 and January 2019 can proceed in part, as reported by Reuters.

iphone-trade-in-store.jpg

In January 2019, Apple lowered its revenue guidance to $84 billion for the first quarter of its 2019 fiscal year, down from its original forecast of $89 billion to $93 billion. In a letter to shareholders, Apple CEO Tim Cook said that lower than anticipated iPhone revenue, primarily in Greater China, accounted for the entire revenue shortfall.

On an earnings call in November 2018, a few months earlier, Cook touted the "very successful launch of iPhone XS and iPhone XS Max" and also noted that iPhone demand in China was particularly strong during the fourth quarter of its 2018 fiscal year. Apple made no mention of potential iPhone or China weakness on the horizon.

In her order, however, judge Rogers wrote that "absent some natural disaster or other intervening reason, it is simply implausible that Cook would not have known that iPhone demand in China was falling mere days before cutting production lines," likely referring to a Wall Street Journal report that claimed Apple slashed production orders for the iPhone XS, iPhone XS Max, and iPhone XR just days after its earnings call.

"It is also implausible that Cook was unaware of emerging market issues in China despite admitting two months later that the Company observed worrying signs throughout the quarter," added Rogers.

On its November 2018 earnings call, Apple also announced that it would no longer be disclosing iPhone, iPad, and Mac unit sales going forward. Rogers said this decision "plausibly suggests that defendants expected unit sales to decline."

Apple's stock price dropped up to 10 percent in the hours after it lowered its revenue guidance, resulting in losses for shareholders. The complaint is led by the Employees' Retirement System of the State of Rhode Island.

Article Link: Lawsuit Accusing Apple of Hiding Weakening iPhone Demand Prior to Early 2019 Revenue Warning Allowed to Proceed
 

appleguy123

macrumors 604
Apr 1, 2009
6,645
1,124
15 minutes in the future
If you can’t handle the risk, don’t own the stock. I don’t think you can sue your way out of a failed trade, can you?

These clowns should be forced to pay for Apple’s legal fees.
When you purchase a share of a company, you are purchasing a product. There is always risk in the stock market, but it is the CEO’s job to accurately describe the current state of the company to its shareholders (owners) so that these purchases can be made in an informed way. If it’s proven in court that he hid material information from shareholders for longer than he needed to, appropriate action should be taken.
 

bbeagle

macrumors 68040
Oct 19, 2010
3,442
2,737
Buffalo, NY
None of what Tim Cook did here was a lie.

Apple's 4th quarter ends on September 28. In November, Tim said that iPhone demand in China was particularly strong during the fourth quarter of its 2018 fiscal year. For July, August and September, that was true.

Tim did NOT say what was happening in October or November, whether it was good or bad. People might have assumed that October and November were as good as July, August and September, but it was their OWN assumptions that they were wrong about, not Tim lying.
 

konqerror

macrumors 68020
Dec 31, 2013
2,298
3,694
If you can’t handle the risk, don’t own the stock. I don’t think you can sue your way out of a failed trade, can you?

If you don't want to be honest and transparent to the public, then don't sell stock to the public.

By being a member of a stock marketplace with strict disclosure rules, ordinary people can buy stock without having to hire a fleet of lawyers and auditors. Apple benefits by being able to pay employees and acquire companies with stock. Tim Cook, like ordinary shareholders, benefits by being able to sell his stock awards easily in a liquid fashion.

This is something any stock owner should know and has been highly relevant recently: look at the Luckin Coffee scandal. Similarly, Dell didn't want the pressures of public scrutiny, so the company was taken private for several years.
 
Last edited:

PinnyHead

macrumors newbie
Apr 2, 2019
24
51
This isn’t just individual 1% Richie Rich types who could have been mislead into buying AAPL right before the stock fell...it is anyone with a pension or 401k.
 
  • Like
Reactions: NMBob

gsurf123

macrumors 6502
Jun 1, 2017
278
447
He is not required to change guidance and any way the guidance a company provides is ignored by the brokerage houses because they make up their own. I would say it was unprecedented to announce that guidance was going to be off. I am glad they are out of the guidance business as it is nonsense.
 

Constable Odo

macrumors 6502
Mar 28, 2008
481
267
I believe there were analysts who warned of weakened iPhone demand and I suppose investors could have listened to them and taken appropriate action. I have been holding Apple stock since 2004 and have seen fantastic gains in Apple's value. I not sure I would have sold even if Tim Cook said there was weakened demand. I would have simply taken it as a short-term warning and not a reason to sell my shares. Fortunately for me, Apple did recover and I was still collecting my dividends so I wasn't hurt financially in any way. I didn't know investors could sue a company for poor performance, so I suppose there must be plenty of companies getting sued. Sears, J.C. Penney, Lowes, Boeing, etc. must all be facing huge lawsuits. So many companies, like all of the airlines, must be getting sued for being hurt by the pandemic crisis. I guess you can sue for anything that harms you financially but I always thought there was some company disclaimer for those who wish to trade stocks.

Anyway, I think Apple is doing quite well, so I won't be part of the lawsuit against the company. However, I would think the CEO would know sales performance but I didn't know that most CEOs would tell investors that sales were poor. I guess I thought CEOs tried to hide those things from investors so they don't quickly dump their stock which would cause even more harm.
 
  • Like
Reactions: Ciclismo

Analog Kid

macrumors 603
Mar 4, 2003
6,195
5,704
I think the relevant question will be whether anyone profited personally from the timing. If nobody with inside information benefitted personally, then it was just a question of when there was enough confidence to issue guidance.

Looking at the stock, it had been sliding since Sept, then immediately started rising again in January. The market seemed to know what was happening...
 
Last edited:
  • Like
Reactions: SDJim and jjack50

v3rlon

macrumors 6502a
Sep 19, 2014
744
513
Earth (usually)
This isn’t just individual 1% Richie Rich types who could have been mislead into buying AAPL right before the stock fell...it is anyone with a pension or 401k.


Yes, but if it was in your retirement, it should be diversified. So if you had a $1 million 401K, what 5% of that is tied up in APPL, so you lost 5% of 10% (0.5% or saw your savings plummet by $5k to $995,000 on the announcement, oh the pain), and that only IF you retired before the shares recovered. 401K is a long game. The smart move would be to keep buying on the downturn to get APPL at 10% off.

Of course, if you were due to retire in the next 3 months, you shouldn't be gambling with stocks. Your money should be in safer investments like bonds.

Fidelity, Schwabb, and so on have extensive tutorials on the matter.
 

konqerror

macrumors 68020
Dec 31, 2013
2,298
3,694
I think the relevant question will be whether anyone profited personally from the timing. If nobody with inside information benefitted personally, then it was just a question of when there was enough confidence to issue guidance.

You're thinking insider trading. That's not the relevant principle, rather its the full disclosure principle that public companies must disclose all relevant "material facts" of their operations.

 

I7guy

macrumors Penryn
Nov 30, 2013
27,438
15,764
Gotta be in it to win it
You're thinking insider trading. That's not the relevant principle, rather its the full disclosure principle that public companies must disclose all relevant "material facts" of their operations.

The question for the courts is what constitutes "material facts" in this case. I know there will be much opinion on this, and we will all have to wait for the outcome.
 
  • Like
Reactions: Analog Kid

Analog Kid

macrumors 603
Mar 4, 2003
6,195
5,704
You're thinking insider trading. That's not the relevant principle, rather its the full disclosure principle that public companies must disclose all relevant "material facts" of their operations.

Actually I was thinking "do I care?". They came in something like 5% below their earlier guidance in the midst of a very public and volatile trade war that they were actively trying to navigate. Looking at the stock, the market seemed to understand the situation and recovered just fine within a few months. Do I care whether they announced they missed guidance a few weeks earlier or later? Only if someone personally profited from controlling that information.

This feels like opportunism on the plaintiffs' part.
 
Register on MacRumors! This sidebar will go away, and you'll see fewer ads.