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.
Dec. 31, 2014, 1:13 PM
- Declaring the payouts necessary to motivate "the key drivers" of its restructuring, GT Advanced (OTCPK:GTATQ -3%) has asked the court handling its Chap. 11 bankruptcy to sign off on millions in executive bonuses.
- If the plans are approved, GT expects to pay $2.275M to nine senior execs through a program that could double the salaries of certain execs if targets are hit. It expects to pay $1.4M to 28 other employees who don't qualify as "insiders."
- For obvious reasons, GT doesn't believe equity bonuses will serve as an effective motivator. Pre-bankruptcy sales by CEO Tom Gutierrez and other execs have received a lot of scrutiny.
- Shares are at $0.35 on the pink sheets.
- Previous: GT Advanced's settlement cleared; furnace proceeds in focus
Dec. 16, 2014, 6:13 PM
- Bankruptcy judge Henry Boroff has signed off on GT Advanced's (OTCPK:GTATQ) revised settlement with Apple, through which GT stands to keep an extra ~$50M as it sells off its 2,000 sapphire furnaces to help pay down $439M in claims held by Apple.
- GT attorney Luc Despins told the court he expects each furnace to sell for at least $500K. Apple will receive $169K/furnace for the first 500 sold, and $224K/furnace for the next 500.
- Advantage Capital's Irvin Schlussel notes the furnace proceeds will determine how much GT's creditors recover ... and if anything will be left over for stockholders. "If they sell these furnaces for $500,000, then all of a sudden we have a great prospect for full recovery for the bonds."
- GT rose to $0.49 on the pink sheets today. Its market cap stands at $67.4M.
Dec. 16, 2014, 2:17 AM
- GT Advanced (OTCPK:GTATQ) modified its settlement with former partner Apple yesterday to produce more near-term cash to support its emergence from bankruptcy.
- The new terms should be worth $50M more than the original settlement, giving GT Advanced four years to sell off the equipment from the abandoned sapphire manufacturing venture to pay down Apple debt.
- The stock, which now trades over the counter, shot 48% higher on Monday to close at $0.41 per share following the news.
Nov. 19, 2014, 1:54 PM
- A hearing for GT Advanced's (OTCPK:GTATQ +5.6%) settlement hearing with Apple has been postponed to Dec. 10 from Nov. 25, to give more time to investigate possible objections from creditors.
- Apple's settlement with bankrupt GT gives the company a $439M claim secured by 2K+ sapphire furnaces that GT plans to sell. Nonetheless, Apple has said it will "continue evaluating" GT's sapphire progress.
- In court docs unsealed earlier this month, GT accused Apple of pursuing "a classic bait-and-switch strategy" that left GT saddled with "an onerous an massively one-sided deal."
Oct. 23, 2014, 1:21 PM
- An Apple spokeswoman: "Apple (NASDAQ:AAPL) put a lot of effort into an ambitious new sapphire manufacturing process with GTAT which is not ready for production. We're going to continue evaluating GTAT's progress on larger sapphire boule development, as well as consider other options for the facility."
- GT Advanced (OTCPK:GTATQ +49.7%) confirmed this morning it has reached a settlement with Apple (previous) that will result in its Mesa, AZ and Salem, MA sapphire production ops being wound down, and that a portion of its sapphire furnace sales will be used to pay down the company's debt to Apple. 650 Mesa employees have been laid off.
- GT "retains control of its intellectual property and will be able to sell its sapphire growth and fabrication technology, including ASF and Hyperion, without restrictions."
Oct. 21, 2014, 7:21 PM
- In a deal that GT Advanced (NASDAQ:GTAT) lawyer Luc Despins calls an "amicable parting of the ways," Apple (NASDAQ:AAPL) and GT have agreed to wind down Apple's Mesa, AZ plant, once expected to provide sapphire that would be used to protect millions of Apple device screens..
- The plant's sapphire furnaces (owned/operated by GT) will be sold - Fortune's Philip Elmer-DeWitt reports 2,039 will be unloaded - and some of the proceeds used to pay down GT's debt to Apple. Apple made $440M worth of prepayments to GT that were structured as secured debt.
- The deal suggests Apple will be turning to 3rd-party sapphire suppliers to obtain cover glass for the Apple Watch, which is set to ship in early 2015. The regular Apple Watch and the high-end Apple Watch Edition use sapphire cover glass; the Apple Watch Sport doesn't.
- As part of the deal, GT is seeking to have the original court docs (currently sealed) that explained its bankruptcy filing struck from the public record. However, its lawyers state GT will be able to disclose most of the information that's pertinent to its bankruptcy.
- Earlier: GT Advanced nears settlement with Apple
Oct. 21, 2014, 11:04 AM
- GT Advanced (GTAT) and Apple "are on the cusp of a consensual global settlement," GT says in a new court filing.
- Attorney Luc Despins: "We’re optimistic that in the next hour or so we will have a signed settlement agreement with Apple. Optimistic, no guarantees of that." He adds the deal "resolves a lot of the issues before the court" in terms of explaining GT's bankruptcy filing.
- GT shares are up 101.6% on the pink sheets to $0.73.
- Last week: GT's bankruptcy hearing delayed
Oct. 16, 2014, 9:08 AM
- The Nasdaq is suspending trading in GT Advanced (NASDAQ:GTAT) as of today's open. Shares will trade on the pink sheets under the symbol GTATQ.
- The company had warned (when announcing its bankruptcy filing) the Nasdaq "may temporarily halt trading in the company's stock pending the receipt of additional information on the company's financial condition."
- Yesterday: GT's bankruptcy hearing delayed
Oct. 15, 2014, 8:54 PM
- A hearing over GT Advanced's (NASDAQ:GTAT) request to shut down its sapphire manufacturing ops and keep many details about its Chap. 11 filing sealed that was originally set for today has been pushed back to Oct. 21, the day after Apple's (NASDAQ:AAPL) FQ4 report.
- GT, Apple, and a committee of creditors agreed to the push-out. Also delayed: A ruling on Apple's objections to GT's attempt to free itself of certain contracts and leases.
- Nonetheless, the day wasn't without fresh drama. Bankruptcy judge Henry Boroff grilled Apple over its extensive secrecy requests, questioning how much proprietary info was actually included in many of the docs it wants kept private. "I've got a foot-high stack of documents, and it can't be that it all must be sealed."
- Boroff also provided a colorful analogy for the dispute between Apple and its would-be supplier. "I’m seeing what looks incredibly like a construction suit, where a homeowner says to the contractor, 'It didn't come out the way I wanted to,' and the contractor says, 'Well, it would have come out that way if you didn't continue to change the specifications.'"
- Previous: GT suggests it could sue Apple
Oct. 10, 2014, 3:49 PM
- "GT believes that it has many claims against Apple arising out of its business relationship with Apple (AAPL - unchanged)," reads a GT Advanced (GTAT -38.7%) bankruptcy court filing.
- The company has confirmed it's closing down the Mesa, AZ plant where it has been producing sapphire for Apple, and cutting 890 related jobs. GT claims it's losing $1M/day at the operations it plans to close. A hearing on GT's motion for permission to close the plant is set for Oct. 15.
- GT's decision suggests Apple will have to turn to third parties to obtain the sapphire needed for the two Apple Watch models featuring sapphire cover glass. A recent Taiwanese media report stated Apple was aiming to launch the Apple Watch in February, and that supplies are constrained by sapphire output.
- The apparent threat to sue comes as crucial details about GT's bankruptcy filing remain sealed due to a confidentially agreement (almost certainly with Apple) said to carry a penalty of $50M per violation.
- Apple is near breakeven in spite of a 2.2% Nasdaq drop.
Oct. 10, 2014, 12:45 PM
Oct. 10, 2014, 9:07 AM
Oct. 9, 2014, 7:18 PM
- GT Advanced (NASDAQ:GTAT) plans to file a motion seeking authorization to wind down operations at its sapphire manufacturing plants, and has been ordered (.pdf) by bankruptcy judge Henry Boroff to immediately file it. A hearing on the motion is set for 2PM ET on Oct. 15.
- Boroff also orders GT (referred to as "the Debtor") to "provide all such information as shall be reasonably requested to any party in interest and the United States Trustee and, in the Debtor’s sole discretion, to the public press, except that in the event that any such information relates to the details of the Debtors’ business relationship with Apple."
- The order follows a GT request to keep its bankruptcy hearing (with Boroff and Apple) and court documents private. The WSJ says it "inquired about registering a protest over GT’s motion to seal the documents that explain what went wrong between GT and Apple," but didn't receive a response before today's court session.
- GTAT -27.9% AH to $0.93.
Oct. 9, 2014, 12:14 PM
- Squashing hopes that today's hearing would unearth crucial details about GT Advanced's (GTAT +2.3%) Chap. 11 filing, a lawyer representing the company stated a confidentiality agreement prevents it from sharing the cause of its bankruptcy, or its restructuring plan.
- The agreement, said to put GT on the hook for $50M in damages per violation, almost certainly involves Apple, which is famous for demanding airtight secrecy from suppliers.
- A lawyer from the DOJ's bankruptcy watchdog criticized GT's request. "The record is insufficient for the court to find what the court needs to find."
- Prior GT Advanced coverage
Oct. 8, 2014, 12:45 PM
Oct. 8, 2014, 12:04 PM
- Apple (NASDAQ:AAPL), remarking for the first time on GT Advanced's (GTAT +23.1%) bankruptcy filing: "We are focused on preserving jobs in Arizona following GT’s surprising decision and we will continue to work with state and local officials as we consider our next steps."
- The remarks come ahead of tomorrow morning's bankruptcy hearing, which should provide details on the role Apple played in the filing. The WSJ has reported Apple decided to withhold a $139M prepayment due to GT's failure to meet technical milestones.
- GT is currently trading around $1.50. Its market cap is at $153M.
- Prior GT Advanced coverage
GTATQ vs. ETF Alternatives
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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