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Apple facing possible securities fraud lawsuits as stock continues free fall

Value has dropped by more than Facebook's entire worth in just three months

Apple CEO Tim Cook (Stephanie Keith/Getty Images)

In August, Apple became the first U.S. firm to reach a market cap of more than $1 trillion, and coasted through most of 2018 as the highest-valued company in the world.

But over the past three months, the tech giant's stock price has been in a free fall — and the firm blames China's economy.

What are the details?

According to Business Insider, $450 billion has been wiped from Apple's value since the company hit its peak on Oct. 3. To put it that number into perspective, Facebook is currently worth $380 billion ($70 billion less than what Apple lost in the last quarter). As of Thursday, Apple's share price was at $142, which is almost 40 percent less than its $232 high from October.

The stock's decline was accelerated following the release of CEO Tim Cook's letter to investors on Wednesday, where he announced the firm expects to miss first quarter revenue targets. Cook blamed "economic deceleration" in emerging markets and decreased demand for iPhones as drivers for the unanticipated shortfall — particularly pointing to the slowdown of China's economy in the latter half of 2018.

Cook's letter rattled investors, with analysts calling it a "bombshell." According to the Los Angeles Times, Apple's announcement "stoked investors' fears that China's economy, the world's second largest, is losing steam and that the U.S.-China trade war is making things worse."

Mark Zandi, chief economist at Moody's Analytics explained to The New York Times, "Apple is a bellwether. The iPhone is something that everyone knows and buys, and if people aren't buying it, then it's a pretty good sign they're having a hard time."

"If people aren't buying iPhones, they're probably not buying everything else," Zandi reasoned. "It symbolizes how deep China's economic problems are, and we can connect the dots right back to the trade war."

Anything else?

Investor-rights law firm Bernstein Liebhard LLP announced Wednesday that it is "investigating potential securities fraud claims on behalf of shareholders of Apple Inc. resulting from allegations that Apple and/or its executives may have issued materially misleading business information to the investing public."

The firm alleges that Cook's letter blaming business in China for the revenue shortfall is contrary to what he told investors during the company's fourth quarter conference call on Nov. 1, where Cook is quoted as saying, "[Our] business in China was very strong last quarter. We grew 16 percent, which we're very happy with. iPhone in particular was very strong, very strong double-digit growth there."

Business Insider reported that Apple quit disclosing its iPhone single unit sales that same quarter.

One last thing…
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