GT Advanced Technologies: External Forecasts Suggest Restored Shareholder Value
- The modified Apple deal, effectively, eliminates a negative working capital position for GT Advanced.
- While GT Advanced remains a risky investment, this deal preserves their status as a “going concern."
- The deal provides a lifeline and, perhaps, three years to rebuild and restore other sources of revenue.
- As of mid-December, shareholder equity and book value probably approximates zero.
- Any positive news is likely to result in an increase in the trading price for GT Advanced, and favorable execution and momentum will cause price per share increases to "stick."
GT Advanced Technologies: Apple Settlement Creates Opportunity
- The terms of a new deal were announced, benefiting GT Advanced by an additional $50 million.
- At 138 million shares, this modified settlement would add approximately $0.36 to the GT share price.
- However, this presumes that the 52-week low of $0.22 for GT represented a position of zero, and not negative equity for shareholders.
- Even this modified settlement might not mean that GT equity will be spared, despite a very responsive and very favorable market reaction to the news of the “sweetened deal."
- GT management and their execution will tell the tale, post-December tax loss selling.
GT Advanced Technologies: Judge's Sign-Off Of Apple Settlement Sets Company Back On An Old Course
- Bankruptcy court Judge Boroff signed off on a revised deal between GTAT and Apple which significantly improves the prospects for GTAT bond and equity holders.
- We believe the cutting edge nature of the furnaces makes it highly likely that GTAT can sell the equipment at reasonable prices at a substantial income to the estate.
- The future of the equity holders now firmly resides in the company's solar business prospects.
Judge's Comments Put GT Advanced Technologies' Settlement With Apple In Doubt
- The GTAT bankruptcy judge indicates that he is likely to not honor Apple's request for sealing and expunging the Squiller declaration documents from the record.
- The expungement is a condition precedent to the Apple/GTAT settlement, and the judge's comment puts the settlement at risk.
- While a settlement between GTAT and Apple is likely, investors have a reason to be concerned.
Update: GT Advanced Technologies Agrees On A Settlement With Apple
- GT Advanced Technologies has reached an agreement with Apple to wind down the sapphire plant.
- The agreement allows the company to get rid of a major cost source, which has been eating into its cash reserves.
- We maintain that the Hyperion and Merlin can bring substantial revenues and cash flows to the company.
GT Advanced Technologies Update: Beginning Of The End For Chapter 11 Process
- GTAT's deal with Apple secures the Company's future and sets the Company on the path to exit Chapter 11.
- In what appears to be an admission of problems at its end, Apple's claims are limited to a percentage of Mesa furnaces and primed by up to $150M of exit.
- We believe GTAT debt is a sure shot winner and the equity has a strong chance of surviving and prospering.
Apple/GT Advanced Technologies Settlement: Ending The Madness
- Apple and GTAT have announced an “amicable settlement” ending the GTAT supplier agreement.
- Details of the settlement indicate that GTAT built thousands of sapphire furnaces in anticipation of supplying screens for the iPhone.
- The construction of the furnaces was mandated by the supplier agreement.
- GTAT and Apple appear to have miscalculated the cost of building and operating such a huge facility.
- GTAT bankruptcy filings start in earnest an 10/21 as it appears likely that Apple confidentiality veil will be lifted.
- GTAT is moving to shutdown the Mesa facility and it is unclear, what effect, if any, this will have on Apple product roll out.
- Information coming out of the Chapter 11 indicates that GTAT management was consulting with bankruptcy attorneys as early as July first week. This seems inconsistent with prior management guidance.
GT Advanced Technologies' Sapphire Wind-Down A Game Changer For Wafer Prices, Rubicon
- When GTAT entered the sapphire market, the increased competition resulted in declines in sapphire wafer prices. There will likely be some degree of reversal with the company's exit.
- GTAT’s sapphire furnace business will be hit by litigation and court imposed restrictions putting further pressure on total market capacity.
- Rubicon is in a strong position to regain market share lost to GTAT in 2011 and 2012.
- GTAT's disclosures increasingly used non-GAAP measures leading up to its bankruptcy.
- Non-GAAP measures generally score badly using the Fog Index, a measure of readability.
- A combination of increased use of non-GAAP measures and decreasing readability can be a red flag.
- The best way to become a great investor is to learn from mistakes: yours or others'.
- Investors who were blindsided by GTAT can derive a number of lessons for the future.
- While there were no warning signs of impeding bankruptcy, there are a number of reasons why investors should have stayed away from GTAT.
GT Advanced Technologies: Nowhere To Go But Zero (And Yes, I'm Shorting It Here)
- The most intriguing aspect of the GTAT saga is why the stock still commands a $165mm market cap (at $1.2 per share).
- Book value three months ago was only $1.58 per share, and tangible book value was $0.48 per share. Adjusted tangible book value now is much lower (around $0.18 per share).
- Apple remains the largest creditor, with a claim on substantially all PP&E, along with the contractual right to prevent GTAT from selling its materials to anyone else.
- Convertible debt is trading around 35c on the dollar while equity is trading at ~89c on the dollar, which makes no sense. Borrow is now widely available at ~11%.
- Even under wildly optimistic post-restructuring equity valuation scenarios, common equity value is at least 50% lower than the current price.
The GT Advanced Technologies Debacle: Where Does Apple Go From Here?
- GTAT's bankruptcy leaves Apple without its anticipated sapphire supplier.
- Apple still has a pressing need for sapphire for its new watch.
- Apple may be forced to take over the Mesa plant from GTAT, spending whatever additional capex is required to get the plant operational.
GT Advanced Technologies: What Went Wrong And What Investors Need To Know About The Bankruptcy Process
- We believe the management has been blindsided and do not believe the management misled or otherwise committed any fraud.
- The management can certainly be accused of ineptitude and poor risk management.
- There are many unknowns and the management owes investors some candid answers to the fullest extent possible within the limits of the Apple NDA.
- There's some wild speculation going on in GT Advanced Technologies' stock.
- I believe this speculation is misinformed due to several possible factors.
- In the end, the existing shares are likely to be worth zero, even considering those factors.
Oct. 8, 2014, 9:10 AM
Oct. 7, 2014, 5:00 PM
- A Manchester, NH court will host GT Advanced's (GTAT +51.2%) first bankruptcy hearing at 10AM ET on Thursday.
- The hearing should provide details on the specific role Apple played in GT's Chap. 11 filing, and what claims Apple holds on GT's assets going forward. The WSJ has reported Apple held off on using sapphire cover glass for the iPhone 6 due to technical issues, and that the company is withholding a final $139M prepayment.
- Yesterday: Street tries to make sense of GT Advanced's bankruptcy filing
Oct. 7, 2014, 1:44 PM
- In the wake of GT Advanced's (GTAT +132.5%) bankruptcy filing, the WSJ reports Apple (AAPL -0.2%) chose not to use sapphire cover glass for the iPhone 6 following tests in which sapphire "proved brittle, cracking when phones were dropped from various heights and angles."
- A September Time column noted this potential issue (among others). iPhone Gorilla Glass supplier Corning (GLW -1.1%) must be pleased to see the report.
- The WSJ also reports (not surprisingly) Apple is withholding a final $139M prepayment to GT, which depended on operational targets being hit.
- Susquehanna thinks Apple may take possession of the GT sapphire equipment at Apple's Mesa, AZ facility, given its prepayments ($440M to date) were "structured as secured debt." GT shares are rebounding today, but are still only at $1.85.
- An App Store support page indicates 47% of iOS users are now on iOS 8, up just slightly from 46% as of Sep. 21. Bugs related to mobile connectivity (since fixed) and iCloud Drive could be slowing uptake, as might complaints about Wi-Fi speeds and battery life.
- Digitimes, historically better at reporting on supply chain activity than new product features, reports Apple has two 12.9" iPad prototypes: One is a standard tablet, and the other a 2-in-1 device supporting both iOS and Mac OS.
- Tim Cook famously panned the idea of an integrated tablet/PC. Moreover, iOS and Mac OS currently rely on different CPU architectures - the former uses ARM, and the latter x86.
- Digitimes also reports Apple has boosted iPhone 6 Plus production relative to the iPhone 6, following strong 6 Plus demand. Fiksu's data still shows the iPhone 6 having a 3.8x usage edge over the supply-constrained 6 Plus. However, early Chinese registration data showed a nearly even split between the phones.
Oct. 7, 2014, 12:45 PM
Oct. 6, 2014, 6:09 PM
- "It seems abundantly clear that there was a fundamental, severe breakdown in the relationship between Apple (NASDAQ:AAPL) and GT," says Raymond James' Pavel Molchanov, taking stock of GT Advanced's (NASDAQ:GTAT) bombshell Chap. 11 announcement.
- Molchanov, who downgraded GT to Underperform on Aug. 28, speculates Apple may have "unilaterally opted for a different sapphire supplier for purely business reasons," or that GT's Mesa, AZ plant may have "suffered serious technical defects and was unable to meet the agreed-upon obligations with Apple." He expects GT's equity will most likely prove worthless.
- Gilford Securities Nimal Vallipuram thinks Apple may have requested "prepayment of some loans due to GTAT not meeting performance targets related to sapphire manufacturing." Nonetheless, he doesn't get why "the two companies did not restructure the agreement to buy some time for GTAT."
- Matt Margolis: "It is evident now that GTAT did not meet the required metrics to receive the final prepayment from Apple. In addition, GTAT burned through $248m of cash during the past two months." Back in August, GT said it expected a final $139M prepayment from Apple by the end of October.
- Shares closed today at $0.80. They're at $0.91 AH.
Oct. 6, 2014, 12:46 PM
Oct. 6, 2014, 10:48 AM
Oct. 6, 2014, 10:17 AM
- In a stunning announcement, GT Advanced (NASDAQ:GTAT) says it has "commenced voluntary cases under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Hampshire."
- GT had just $85M in cash as of Sep. 29, and is now seeking debtor-in-possession financing. It observes the Nasdaq "may temporarily halt trading in the company's stock pending the receipt of additional information on the company's financial condition."
- No details have been given on what changes occurred to GT's relationship with Apple (if any) to bring about the filing.
- Shares remain halted.
Oct. 6, 2014, 9:42 AM
Oct. 2, 2014, 1:32 PM
- GT Advanced (NASDAQ:GTAT) has postponed a business update call originally set for this week to next week. "Further details" will be provided later.
- Shares have spiked higher; they were down as much as 6% earlier today. An overnight Taiwanese media report stated the Apple Watch won't launch until February, and that supplies will be constrained by sapphire output.
- 55.6M shares (41% of the float) was shorted as of Sep. 15. Many of those shorts have seen big gains over the last month.
Sep. 22, 2014, 7:24 PM
- Re/code: "Based on conversations with people familiar with Apple’s (AAPL +0.1%) thinking: Apple won’t shutter the [Beats Music] streaming service. It may, however, modify it over time, and one of those changes could involved changing the Beats Music brand."
- Re/code's report follows one from TechCrunch stating Apple is planning to shut down Beats Music and "sunset the Beats Music brand." Apple spokesman Tom Neumayr says TechCrunch's report is "not true," but doesn't elaborate.
- Gene Munster estimates ~8M of the 10M+ iPhone 6 units Apple sold over the weekend wound up being purchased by consumers, with the remaining ~2M going into the channel. That implies 45% consumer sell-through growth over estimated first-weekend iPhone 5S sales of 5.5M.
- Patently Apple notes Apple has filed a patent application for a new sapphire glass-strengthening process. The application relates to the use of coatings on a material such as sapphire.
- GT Advanced (GTAT +1%), whose shares were hit hard by news that the iPhone 6 (unlike the Apple Watch) doesn't use sapphire cover glass, closed higher today. Last week, Time took a look at the technology challenges that may have led Apple to opt against using sapphire cover glass for the iPhone 6.
Sep. 10, 2014, 12:47 PM
Sep. 10, 2014, 9:15 AM
Sep. 10, 2014, 7:18 AM
- Apple's not including sapphire display technology in either of the new iPhone 6 models, but having it for the Watch "is disappointing from both a timing and volume perspective for GTAT," says Goldman analyst Brian Lee, downgrading the stock to a Neutral, with price target cut to $14 from $20.
- Removing 20M iPhone units from his model and replacing with 10M watches brings estimated 2014 revenues down to $497M from $634M, and EPS to $0.09 from $0.12.
- Piper Jaffray downgrades to Neutral, with price target cut to $16 from $23.
- Shares -10.9% premarket after yesterday's 12.9% slide.
- Previously: Apple event kicked off, iPhone 6 introduced
Sep. 9, 2014, 1:23 PM
- Apple (NASDAQ:AAPL) fires off its product event in Cupertino with an introduction of the iPhone 6 and iPhone 6 Plus right off the bat.
- The curved iPhone 6 will be sized at 4.7-inches, while the larger version comes in at 5.5-inches (phablet territory) as expected.
- The iPhone 6 and 6 Plus feature next-gen retina displays and are thin at 6.8mm and 7.1mm, respectively.
- A new A8 chip will load graphics 50% faster.
- No mention of sapphire glass which has GT Advanced Technologies (GTAT -6.2%) tumbling.
- Shares of AAPL +1.0% to $99.12 after bouncing around the $100 mark prior to the event.
- Apple webcast, Engadget live blog
Sep. 3, 2014, 12:16 PM
- Apple suppliers Cirrus Logic (CRUS -3%), GT Advanced (GTAT -5%), Skyworks (SWKS -2.3%), TriQuint (TQNT -2.6%), and RF Micro (RFMD -2.8%) are following Apple lower after Pac Crest recommended investors start taking profits on the tech giant ahead of its Sep. 9 event. Expected iPhone 6 motion sensor supplier InvenSense (INVN -3.3%) is also off.
- GT was hit recently by two downgrades, partly offset by a bullish coverage launch. InvenSense, Skyworks, TriQuint, and RF Micro have all rallied strongly over the last 3 months.
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GT Advanced Technologies is a leading diversified technology company producing advanced materials and innovative crystal growth equipment for the global electronics, solar and LED industries. Our technical innovations accelerate the use of advanced materials, enabling a new generation of... More
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