Apple Inc is facing a new lawsuit that accuses it of securities fraud by concealing the fact that demand for its iPhones was slumped particularly in China, revelation of which caused the market value of the company to slide down by $74 billion on that day.
Filed on Tuesday, the complaint seeks damages for investors who bought Apple stock in two months of November and December, before the company’s quarterly forecast was unexpectedly reduced by Chief Executive Tim Cook on Jan 2 to as much as $9 billion partially because of the declining sales due to escalating trade war between the United States and China.
Since launch of iPhone in 2007, it was the first time Apple came on cutting its revenue forecast in January in a rare move.
The forecast led the Cupertino, California-based company’s share price to fell by 10 percent on very next day, which reduced its market value roughly 40 percent below from its highest-ever three month ago market value of $1.1 trillion.
The proposed class action also includes Cook and Chief Financial Officer Luca Maestri as defendants. Apple did not immediately respond to Reuters requests for comment.
The lawsuit was filed by a Michigan pension plan namely the City of Roseville Employees’ Retirement System in the federal court in Oakland, California through a securities class-action specialist Robbins Geller Rudman & Dowd as their representative.
U.S.-China trade war and growing customer preference of replacing batteries in older iPhones caused the demand of iPhone to fall, which forced the Apple not only to reduce new iPhone orders from supplier but also to lower the iPhone prices to keep the inventory at ease, the complaint said.
But, the complaint said, these issues were not disclosed despite of having a need to do so as Apple on Nov. 1, 2018, decided to discontinue practice of disclosing number of iPhone sold.