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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.
A Lesson Learned: The Unfortunate Case Of GT Advanced Technologies
- GT's bankruptcy shocker surprised everyone.
- The relationship with Apple seems to have soured.
- What can investors learn about this unfortunate event?
- GT Advanced Technologies shocked the market when it filed for bankruptcy.
- Actual reasons for dwindling cash will not be known until after bankruptcy proceedings commence.
- 3 takeaways for investors discussed.
GT Advanced, What Happened? Reading Between The Lines On Its Bankruptcy
- On Monday, GTAT unexpectedly announced that it would be seeking bankruptcy protection leading to a precipitous 93% drop in share prices.
- The press release issued from GT Advanced Technologies is rather short on explanation.
- Unless GTAT executives are ignoring their fiduciary duty to shareholders, we can presume the company is unable to discuss specifics surrounding liquidity issues because they are related to confidential contract.
- The elephant in the room regarding the company is their sapphire agreement with Apple which provided them with an interest-free loan so long as they met certain performance metrics.
- If we look at what GTAT did tell us on Monday, we can reasonably conclude that based upon their quickly depleting cash on hand, Apple has pulled its credit line.
Tue, Oct. 7, 12:45 PM
Mon, Oct. 6, 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.
Mon, Oct. 6, 12:46 PM
Mon, Oct. 6, 10:48 AM
Mon, Oct. 6, 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.
Mon, Oct. 6, 9:42 AM
Thu, Oct. 2, 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.
Mon, Sep. 22, 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.
Wed, Sep. 10, 12:47 PM
Wed, Sep. 10, 9:15 AM
Wed, Sep. 10, 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
Tue, Sep. 9, 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
Wed, Sep. 3, 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.
Thu, Aug. 28, 9:22 AM
- Raymond James' Pavel Molchanov: "We are downgrading GT from Market Perform to Underperform, following the stock's exceptionally strong YTD gain of 113%."
- Molchanov's view on GT Advanced's (NASDAQ:GTAT) Apple partnership and solar opportunities hasn't changed, but he also has "a hard time seeing incremental news-flow that would support much upside in the stock," and considers its valuation "quite pricey," even when based on 2016 estimates.
- GT currently trades at 2.2x 2015E sales. CLSA cut shares to Underperform last week. Piper launched coverage at Overweight earlier this week.
Tue, Aug. 26, 9:26 AM
- Piper's Mike Ritzenthaler has launched coverage on GT Advanced (NASDAQ:GTAT) with an Overweight and $23 target.
- He expects shares will "likely react sharply" to iPhone 6-related newsflow, in spite of rumors that only 64GB models will have sapphire cover glass. "We believe that Mesa process yields (though perhaps currently suboptimal) are sufficient to cover the initial production of the iPhone 6, and poised to improve over the next 6-9 months."
- Ritzenthaler also thinks GT could be begin recognizing revenue from its Merlin platform as soon as Q4, from HiCz in Q1 2015, and from Hyperion and HVPE/PVD in 2H15. In the meantime, GT is expected to work through the "sizable backlog" of sapphire furnace orders it has accumulated.
- The launch comes a week after CLSA downgraded shares to Underperform, while citing sapphire production yields and margins.
Wed, Aug. 20, 1:27 PM
- Following a CC with compound semi consulting firm Yole Development about GT Advanced's (GTAT -2.4%) supply deal with Apple, CLSA's Mark Heller reports Yole believes at least one iPhone featuring sapphire cover glass will launch next month. However, it also thinks GT and Apple's sapphire finishing suppliers "are still struggling with yields."
- Yole estimates Apple's all-in sapphire cost is at a steep $25 for a 4.7" display, assuming a 30% growth yield and 60% finishing yield - that's over 8x the $3 cost estimate other analysts have provided for Gorilla Glass (GLW +1.5%) panels. GT is assigned an $8.90 ASP.
- At the same time, Yole thinks costs could drop to $16 if growth and finishing yields respectively improve to 60% and 75%, boosting GT's margins along the way.
- Heller writes Yole's base scenario suggests only 4.7M 4.7" sapphire displays, or 3M 5.5" displays, will be available by September. Worth noting: With Apple having reportedly placed orders for 70M-80M iPhone 6 units, those numbers appear conservative in the event at least one of the models fully uses sapphire.
- Corning is moving higher. The company stated last month Gorilla Glass sales have been hurt by "lower-than-expected sales for planned new models."
- Earlier: CLSA downgrades GT Advanced to Underperform
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