Apple must face lawsuit over Tim Cook's China 2018 sales predictions

AppleInsider

Shareholders who claim to have lost billions because Tim Cook failed to warn them of falling demand in China, have been told they can bring a class-action suit against Apple.

Tim Cook

In 2019, Apple took the unusual step of revising its revenue guidance prediction down because of lower iPhone sales in China. However, a group of shareholders, led by the UK's Norfolk County Council, now say that this was too late. They argue that CEO Tim Cook should have foreseen the issue and said so during Apple's late 2018 financial earnings call.

During that November 2018 earnings call, Cook said that Apple was seeing what he described as sales pressure in some markets. However, he then stated that, "I would not put China in that category."

According to Reuters, US District Judge Yvonne Gonzalez Rogers now says that the shareholders' group, may bring a proposed class-action suit accusing Cook of concealing falling sales demand. Rogers said that Cook may not have known specifics, but it "strains credulity" that he would have been unaware of trade tensions and possible impact on sales.

According to Judge Rogers, the shareholders' argument presented a "cogent and compelling inference that Cook did not act innocently or with mere negligence."

Reuters reports that Apple has not responded to the ruling, but has previously said there is no proof that it defrauded the shareholders, or intended to.

The plaintiffs reportedly also filed unknown claims regarding sales of the iPhone XS, and iPhone XS Max. However, Judge Rogers dismissed both.

iloveapplegear

The markets are unpredictable.
Bet investors are not complaining when shares have been rising year after year.

rob53

The market is simply legalized gambling. There’s no guarantees so you win some, you lose some. Everyone knows that when they “invest” in the market. 

foregoneconclusion

If you look at the notes AppleInsider had for that November earnings call, China had double digit growth in iPhone sales for that quarter. How can Cook be "concealing" falling sales in that particular call if that's factual? Also, the "not in that category" reference by Cook appears to be related to countries that had currency devaluation versus the dollar and Apple makes the comment that they had to raise prices in some of those countries. India and Brazil were the only ones that were flat or down relative to sales. 

rotateleftbyte

Guidance is nothing more than a racing tip. Sometimes they win, sometimes they lose.

Apple should henceforth stop issuing any guidance whatsoever.  One less attack vector for the trigger happy lawyers from Sue, Sue, Sleazebag and Shyster.

{disclaimer:

 I have never directly owned any APPL stock. At this point in time I own stock in one company and that is not a Tech company}

Sarkany

Information like that can't be kept secret from shareholders. I'd raise a fit too if I had Apple shares and found out too late about China's decline in sales.

greginprague

foregoneconclusion said:

If you look at the notes AppleInsider had for that November earnings call, China had double digit growth in iPhone sales for that quarter. How can Cook be "concealing" falling sales in that particular call if that's factual? Also, the "not in that category" reference by Cook appears to be related to countries that had currency devaluation versus the dollar and Apple makes the comment that they had to raise prices in some of those countries. India and Brazil were the only ones that were flat or down relative to sales. 

Earnings are reported nearly a month after the time period covered by the report. Sales in China could have started trending downward in November even if they had been great during the previous quarter.  I think the lawsuit is garbage, but just providing a response to your question.

InspiredCode

This is too much of a stretch. If Apple had a history of inaccurate guidance that would be another thing, but they don’t and deserve the benefit of the doubt that they let investors know as soon as they knew. Frankly Apple is still a long term stock. Investing over short term market changes is at your own risk and everyone knows China is a huge wild card. Apple is not looking for short term investors which is why they don’t break down their product categories.

InspiredCode

Sarkany said:

Information like that can't be kept secret from shareholders. I'd raise a fit too if I had Apple shares and found out too late about China's decline in sales.

They did let them know. That is what the guidance adjustment that they issued was for.  I can’t imagine they could have revised more then a couple weeks earlier at best.

foregoneconclusion

greginprague said: Earnings are reported nearly a month after the time period covered by the report. Sales in China could have started trending downward in November even if they had been great during the previous quarter.  I think the lawsuit is garbage, but just providing a response to your question.

That's part of what doesn't make sense. The next quarter for Apple would have ended in late December 2018. The revised guidance was made in January 2019. So they're using a call related to a quarter ending in late September 2018 to complain about guidance for a quarter ending in late March 2019.

ro_ro_ur_boat

Short term investors = traders. The odds that a stock or “market” goes up on a daily basis is ~52% and ~48% that it will go down. In my view, that’s 50/50. For them to trade based in guidance and sell when the stock price is down, was the traders’ own choosing. 

I believe they just want quick bucks from Apple. Lawsuit is rubbish. Just an opinion from rookie investor. 

Disclosure: I own <20 stocks and AAPL (currently trading $116.99 at the writing of this comment) is one of them. 

gatorguy

"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 Apple was facing sales pressure in some emerging markets, “I would not put China in that category.”

Apple 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.-China trade tensions."

mike1

...but it "strains credulity" that he would have been unaware of trade tensions and possible impact on sales.

Didn't the whole world, including the investors, know about the trade tensions???

rob53

ro_ro_ur_boat said:

Short term investors = traders. The odds that a stock or “market” goes up on a daily basis is ~52% and ~48% that it will go down. In my view, that’s 50/50. For them to trade based in guidance and sell when the stock price is down, was the traders’ own choosing. 

 

Like you say, short-term investors could care less about the company behind the stock they're trading. The more they trade the more they make in commissions. Anyone who's seen the roller coaster ride the market has been on in the last decade knows you need to look long-term and ride out the bumps while watching for companies trying to rip off investors. The small investors, like me, who only have investments tied to their retirement accounts, have to sign paperwork releasing liability from the retirement account managers if they want to go outside the "norm" investment. I know this because I did it. Of course I did it a bit late but am waiting for it to come back up. 

"The richest 1 per cent of Americans now account for more than half the value of equities owned by US households..."

lkrupp

rob53 said:

The market is simply legalized gambling. There’s no guarantees so you win some, you lose some. Everyone knows that when they “invest” in the market. 

I assume, then, that you do not invest in the stock market? I hope you realize that no matter how much you save, or where you save it, you will lose money over the long hall. The cost of living will see to that. A balanced, well managed portfolio is not legalized gambling

GeorgeBMac

rob53 said:

ro_ro_ur_boat said:

Short term investors = traders. The odds that a stock or “market” goes up on a daily basis is ~52% and ~48% that it will go down. In my view, that’s 50/50. For them to trade based in guidance and sell when the stock price is down, was the traders’ own choosing. 

 

Like you say, short-term investors could care less about the company behind the stock they're trading. The more they trade the more they make in commissions. Anyone who's seen the roller coaster ride the market has been on in the last decade knows you need to look long-term and ride out the bumps while watching for companies trying to rip off investors. The small investors, like me, who only have investments tied to their retirement accounts, have to sign paperwork releasing liability from the retirement account managers if they want to go outside the "norm" investment. I know this because I did it. Of course I did it a bit late but am waiting for it to come back up. 

"The richest 1 per cent of Americans now account for more than half the value of equities owned by US households..."

Since the market has, since 2008, been artificially boosted by the Fed via their QE and ZIRP policies and, more recently, with multiple Trillions of dollars fiscal stimulus and tax breaks for the rich I would not count on anything in the U.S. market "long term".    Or, more specifically, I wouldn't count on anything positive for investors long term.

Eventually, ya gotta pay the piper for the free ride.

GeorgeBMac

lkrupp said:

rob53 said:

The market is simply legalized gambling. There’s no guarantees so you win some, you lose some. Everyone knows that when they “invest” in the market. 

I assume, then, that you do not invest in the stock market? I hope you realize that no matter how much you save, or where you save it, you will lose money over the long hall. The cost of living will see to that. A balanced, well managed portfolio is not legalized gambling

Nah!  It's gambling.   It's just that some people are better at it than others -- at least partly because they have better information available to them (and know how to use it) than others.

Early in my career at worked at an RCA plant which was close to a harness racing track.   There was a group there whose day job was betting at the track and who only used their RCA job for pocket change.   They knew every horse and every jockey and how each was feeling each day.   They placed bets but they weren't gambling in the normal sense of the word.

Likewise some gamble in the market while others place well informed, well placed and well times bets.

DAalseth

lkrupp said:

rob53 said:

The market is simply legalized gambling. There’s no guarantees so you win some, you lose some. Everyone knows that when they “invest” in the market. 

I assume, then, that you do not invest in the stock market? I hope you realize that no matter how much you save, or where you save it, you will lose money over the long hall. The cost of living will see to that. A balanced, well managed portfolio is not legalized gambling

I don’t. My folks invested in a mutual fund through the 70s, 80s, and into the 90s and lost money. Friend of mine invested in the 90s and almost lost his house. That sort of thing happened multiple times to friends and family members. I looked into investing over the years, and every company I thought of buying into either folded or turned out to be a scam. The ones I didn’t want to bet on, Apple, did well. It’s just a crap shoot. People say they have a system to win at blackjack too. But they don’t come out ahead either. 

foregoneconclusion

gatorguy said: Apple 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.-China trade tensions."

Something to remember though: that curb in production would have been happening in Apple's 1st quarter (early October thru late December), but their legal complaint isn't about guidance for the 1st quarter because it was never revised. It's about the guidance for the 2nd quarter. That's what was revised. So the question is this: if you're quoting Cook from a call about the 4th quarter, why would you be expecting guidance for the 2nd quarter during that call? As an investor, you would be expecting guidance on the 1st quarter. 

studiomusic

DAalseth said:

I don’t. My folks invested in a mutual fund through the 70s, 80s, and into the 90s and lost money. Friend of mine invested in the 90s and almost lost his house. That sort of thing happened multiple times to friends and family members. I looked into investing over the years, and every company I thought of buying into either folded or turned out to be a scam. The ones I didn’t want to bet on, Apple, did well. It’s just a crap shoot. People say they have a system to win at blackjack too. But they don’t come out ahead either. 

How does investing almost lose you a house? Unless you mortgage your house to get money to invest or use your rent money to invest... which are both stupid.

lkrupp

DAalseth said:

lkrupp said:

rob53 said:

The market is simply legalized gambling. There’s no guarantees so you win some, you lose some. Everyone knows that when they “invest” in the market. 

I assume, then, that you do not invest in the stock market? I hope you realize that no matter how much you save, or where you save it, you will lose money over the long hall. The cost of living will see to that. A balanced, well managed portfolio is not legalized gambling

I don’t. My folks invested in a mutual fund through the 70s, 80s, and into the 90s and lost money. Friend of mine invested in the 90s and almost lost his house. That sort of thing happened multiple times to friends and family members. I looked into investing over the years, and every company I thought of buying into either folded or turned out to be a scam. The ones I didn’t want to bet on, Apple, did well. It’s just a crap shoot. People say they have a system to win at blackjack too. But they don’t come out ahead either. 

I do. I’ve been retired for years now and live off my IRAs and Social Security. My IRAs are in the hands of a registered fiduciary investment advisor associated with a major investment house (Stifel Nicolaus). At the present I have more money than what I have taken out to live on (even after paying advisory fees) and fully expect these investments to last for whatever time I have left on this planet. Then it goes to the kids.