Apple board members including CEO Tim Cook have been sued four times now over the guidance they had provided for Q1 2019.
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Shares of Apple dropped 9% after the company revised its originally announced guidance of Q1 2019 revenue between $89-93 billion to $84 billion. It cited a lesser amount of iPhone upgrades after its battery replacement program, fewer carrier subsidies, currency fluctuations that made prices rise in some markets, and U.S. trade tensions with China. The revised number turned out to be more accurate; Apple announced $84.3 billion in revenue for the quarter.
The suit was filed in San Jose by John Votto, an Apple shareholder, for “Verified Stockholder Derivative Complaint for Breach of Fiduciary Duty and Violation of the Federal Securites laws.” He says he is suing the board of directors on behalf on Apple, Inc. itself.
The lawsuit states, “This is a shareholder derivative action brought in the right, and for the benefit, of Apple against certain of its officers and directors seeking to remedy Defendants’ violations of state and federal law that have occurred from August 1, 2017, through January 2, 2019 (the “Relevant Period”), and have caused, and continue to cause, substantial harm to Apple, including monetary losses and damages to Apple’s reputation and goodwill […] During the Relevant Period, the Defendants misrepresented and/or failed to disclose multiple material factors that negatively impacted Apple’s iPhone sales and revenues, including that, inter alia: (a) consumer demand for new iPhone models was negatively impacted by Apple’s sales of heavily discounted battery replacement program for older iPhone models, as customers chose not to upgrade or to delay same; (b) macroeconomic factors, including an escalating trade war with the United States, increased competition from cheaper smartphones, and sluggish economy, were likely to negatively affect, and were doing so, Apple’s iPhone sales in China; and (c) that as a result of the foregoing, the Defendants lacked a reasonable basis when issuing positive iPhone sales and revenue guidance for the first quarter of 2019, and when publicly denying the existence and negative impact of the foregoing.
Such an argument may not pan out for Votto, but he argues that the company’s temporarily-damaged reputation following the revised announcement caused the drop in the stock price.
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