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Apple must face shareholder lawsuit over CEO's China sales remark: US court

Apple and Cook have said there was no proof they defrauded or intended to defraud the plaintiffs

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Apple  | Tim Cook | China

Reuters 

Apple CEO Tim Cook poses with the all-new iPhone 12 Pro at Apple Park in Cupertino, California. Photo: Reuters
Apple CEO Tim Cook poses with the all-new iPhone 12 Pro at Apple Park in Cupertino, California. Photo: Reuters

By Jonathan Stempel

(Reuters) - Inc has been ordered to face a proposed class-action lawsuit by shareholders who accused Chief Executive of concealing falling demand for iPhones in China, resulting in billions of dollars of investor losses.

In a decision on Wednesday, U.S. District Judge Yvonne Gonzalez Rogers said shareholders led by a UK pension fund can sue over Cook's comment on a Nov. 1, 2018, analyst call that while was facing sales pressure in some emerging markets, "I would not put in that category."

told suppliers to curb production a few days after Cook spoke, and on Jan. 2, 2019, unexpectedly cut its quarterly revenue forecast by up to $9 billion, which Cook blamed in part on pressure on China's economy from U.S.-trade tensions.

The lowered revenue forecast was the first by Cupertino, California-based Apple since the iPhone's launch in 2007. Shares of Apple fell 10% the next day, erasing $74 billion of market value.

Apple and Cook have said there was no proof they defrauded or intended to defraud the plaintiffs. The company did not immediately respond on Thursday to requests for comment.

In a 23-page decision, Rogers said shareholders plausibly alleged that Cook's statements on the analyst call about were materially false and misleading.

She said that while Cook might not have known specifics about "troubling signs" in China that the company had begun seeing, it "strains credulity" he would have been in the dark about the trade tensions and their possible impact on Apple.

The plaintiffs raised a "strong inference" that Cook knew about the risks when discussing China on the analyst call, and a "cogent and compelling inference that Cook did not act innocently or with mere negligence," Rogers wrote.

Rogers, who works in Oakland, California, also dismissed claims related to demand for the iPhone XS and XS Max.

The plaintiffs are led by the Norfolk County Council as Administering Authority of the Norfolk Pension Fund, located in Norwich, England.

The case is In re Apple Inc Securities Litigation, U.S. District Court, Northern District of California, No. 19-02033.

 

(Reporting by Jonathan Stempel in New York; Editing by Matthew Lewis)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Thu, November 05 2020. 23:59 IST
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