Tim Cook’s comments that cost Apple nearly half a billion dollars

Words carry weight, especially when spoken by the CEO of a company as important as Apple.

In November 2018, Apple CEO Tim Cook made a statement that seemed innocuous at the time, but cost the company.

During the presentation of the financial results, he mentioned the difficulty in some emerging countries, but assured that China does not fall into this category.

However, a few weeks later, Apple issued a warning about the upcoming results, admitting that the situation in China is not as prosperous as expected.

The statement caused Apple’s market capitalization to plummet and legal action from disgruntled investors. After a long legal battle, Apple finally agreed to pay $490 million to settle the dispute.

Words carry weight

As with any company, and especially for a group with such a significant valuation, the statements of the CEO and other CEOs are scrutinized by investors, analysts and the media.

In this case, Tim Cook’s statement was interpreted as confirmation that China, Apple’s second largest market after the United States, was strong. However, the reality was different. The US-China trade war and the global economic slowdown have affected the demand for Apple products in China.

When Apple issued its next earnings warning in China, the company’s market capitalization dropped by $74 billion in a single day. This explains the legal action by investors, and in particular by British pension funds.

Apple tried to overturn the complaint, explaining that Tim Cook was not commenting on the future situation in China when he praised Apple’s performance in the country during the previous quarter. However, Judge Yvonne Gonzalez Rogers rejected this argument, finding that Tim Cook’s comments also described forecast trends for sales, not just past analysis.

After a long legal battle, Apple finally agreed to pay $490 million to settle the dispute. This amount will be allocated to the investors Who bought Apple shares between Tim Cook’s November comments and his January letter

. While this amount is significant, it represents only a fraction of Apple’s market capitalization of more than $2 trillion.

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