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The Reason For GT Advanced Technologies Shocking Bankruptcy: "Severe Liquidity Crisis"
Those wondering why Apple's favorite sapphire glass maker shockingly went from a market cap of $1.5 billion to $0 (net of 45% of the market cap being short, trying to cover and pushing the stock price briefly just above $0.00) in the span of milliseconds, such as "smart money" investors Fidelity, Blackrock and Wellington which collectively owned almost 30% of the company...
... will not get an answer for a while, and certainly not from its public filings, all of which provided a picture of a company that was apparently in good health and worth well over $1 billion, thus making one wonder how much 10(b)-5 fraud there is in this bankruptcy.
One certainly won't get it from Stifel's Sven Eenmaa or Cowen's Jeffrey Osborne, both of whom had the stock at a "Buy" as recently as Friday with a $20 and $18 price target.
The "recent developments" section of GTAT's August 8 10-Q filing does have a little more but also nothing of alarm:
Since the Company's subsidiary, GTAT Corp. entered into the Master Development and Supply Agreement (“MDSA”), facility lease and related agreements with Apple Inc., on October 31, 2013, the Company has expended significant capital resources in order to fund the establishment of its sapphire growth and fabrication facility in Mesa, Arizona ("the facility"). During the three and six months ended June 28, 2014, the Company incurred significant costs in connection with (i) the purchase, installation and qualification of production equipment and related production processes, and (ii) inventory losses and production inefficiencies to date at the facility. Such inventory losses and production inefficiencies are discussed in additional detail below within Note 2, Significant Accounting Policies under the heading Sapphire Production Ramp Up Costs. The capital resources expended in connection with the purchase and installation of production equipment and the costs incurred in commencement of operations have had a significant impact on our liquidity and financial results.
For the three month period ended June 28, 2014, the Company recorded a loss from operations of $84,405 and a net loss of $86,381. For the six month period ended June 28, 2014, the Company incurred a loss from operations of $139,043, a net loss of $127,778, and used $102,380 in cash for operating activities.
Under its Prepayment Agreement with Apple ratably (on a quarterly basis) over a five year period beginning in January 2015, either as a credit against amounts due from Apple's purchases of sapphire goods under the MDSA or as a direct cash payment. The Prepayment Amount is non-interest bearing. The Company’s obligation to repay the Prepayment Amount may be accelerated under certain circumstances, including if the Company does not meet certain operating metrics or financial covenants. See Note 3 for additional information on the Prepayment Agreement.
The Company is currently in compliance, and based on the Company’s operational plans and financial forecasts, the Company expects to maintain compliance with the operating metrics and financial covenants in the Prepayment Agreement and management believes that the Company will have sufficient cash resources to fund operations for at least the next twelve months.
Well, yes, covenant-lite deals FTW.
In fact, the only piece of information that provides some clarity on what happened leading to the stunning Chapter 11 filing out of the blue, is the following brief blurb in the first day motions:
EVENTS LEADING TO CHAPTER 11
GTAT is facing a severe liquidity crisis due to circumstances that will be more fully described at the hearing on the First Day Pleadings.
Why not explain now? Did "key customer" Apple have something to do with the gag order?
Because as anyone who lost 90% of their equity in seconds earlier today (after listening to others such as Cramer extoll the virtues of the next Bear Steanrs) found out, yes: the company does indeed have a severe liquidity crisis.
In any case, while there is not much there, the full declaration in support of first-day motions is presented below:
The complete GTAT Ex-Parte motion to preserve the company's biggest remaining asset, its NOLs:
We'll spare you the full list of creditors, all 459 pages of them. Suffice to say that Apple is among them.
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This is why exchange my excess federal reserve promisorry notes for that beautiful white metal...
An iPhone 6+?
Yellen no like GTAT?
Kevin Henry told to cut them off?
Dat's discriminatory & raycisss.
BTFD...,
...oh, wait.
BREAKING: CEO went long his own company, per Cramer recommendation. Loses everything.
I think I have identified the problem: GT doesn't supply sapphire screens for Apple iPhones. Because the iPhone DOES NOT HAVE A SAPPHIRE SCREEN. Just regular old "gorilla glass" or whatever it's called, like the previous 5 versions.
Little bitty camera lens covers are sapphire glass (not sure if GT supplies them to Apple, however) and the glass face of the iWatch. That's all, folks.
That's public knowledge. Maybe the "benders" were Safire...sapphire glass.
Apple pulled the plug on this bitch. Everyone else was standing around with their dicks in their hand.
"Bankruptcy Court in New Hampshire" is a new one though.
That's normally handled in Utica, NY.
Can't Apple lend them some money, or even buy them out?
"Bankruptcy Court in New Hampshire" is a new one though."
Yeah, I had the same comment in the article about it this morning. Who incorporates in New Hampshire (and therefore goes through bankruptcy in New Hampshire)? Delaware is probably the most common and for good reason.
This is intriguing. I have never seen a first day Aff'd with the nature of events leading to Ch 11 description being one non-descript sentence. Not sure that would fly in DE. Plus, Wilmington has so many bored bankruptcy attorneys these days the entire courtroom would be filled with attorneys to hear what they had to say. There is something going on here that they are trying to hide.
*edited to correct about 11 typos.
Edit #2 - I guess if they were unable to timely provide the information (an unexpected filing?) and make it match up with prior statements as a publicly traded company, that could explain it. This could backfire -- typically the Aff'd would be entered as testimony and is often unchallenged. Now Mr. Squiller must testify and is subject to cross-examination. Now that I have typed this out. . .it is really boring stuff.
iWatch, lulz.
Douche Product Winner at both the 2014 Dungeons & Dragons & Zork Conventions.
Can you spell "accounting fraud"?
Sure, it's spelled, "I R R E G U L A R I T I E S."
turnover is vanity, profit is sanity and cash flow is reality.
I suppose that might be a problem.
The top may be in. They have started eating each other.
musical chairs, fun game... if there is one, there will be others, the music is only getting faster...
This is not a niw story. Promising company gets a bit ahead of itself on cash oulays then goes to creditors (who will own said promising company if it folds) for a bit of leniency with those payments and surprise, there is no leniency. Cash flow is a bitch. The only question is how much those creditors who just got a billion dollars richer manipulated events to create the liquidity crisis. Once it existed you can trust a shark to be a shark. Goldman's got to be in the mix somewhere.
I agree on silver... however, to this point here... Could this be a case where the insiders, through some alchemical act of financial hilarity actually received a trav style "blowtorching?"
LMAOnade anyone?
This was amazing when it happened and I agree, fruad had to have been involved.
Cryptos are much safer tbh
http://phstones.com/mobile.php
No one likes to pay until they get paid.
maybe Apple [slow(ing) sales?] told them 90 days
AAPL has always created false supply shortages in its newly-announced products, to give the aire of exclusivity. This is evidenced in the latest iBend 6 offering, for which there are STILL lines and to which those waiting are told, they can't get a phone for 30+ days.
If you're creditor/lender of/to Sears and its genius (/sarc) CEO, Eddie "Fast Money" Lambert, pray.
"Sears Canada has been facing mounting challenges for years, squeezed by growing competition and a U.S. parent that is known more for financial engineering than merchandising know-how.
"Now Sears Holdings is signalling that it is focusing on its own troubles in the U.S. and less on its Canadian business, once a star division of the retailer."
**"From suppliers to landlords and retirees, various groups are concerned that Sears’ troubles will escalate as it sells off assets to raise money amid sagging sales and pressured profits."
http://m.theglobeandmail.com/report-on-business/international-business/u...
I wonder how "valuable" are Sears' NOLs?!
I look for Sears to buy or be bought for those NOLs. But then, who's making making any profit to use those NOLs against? Boeing? Lockheed Martin? Booz Allen Hamilton? Blackwater/Xe//Academi?
An American, not US subject.
Liquidity crisis?
Apple could have bought them with the change in their pocket.
I smell an old rotten Halibut wrapped in the stock pages of Friday's newspaper.
"I smell an old rotten Halibut wrapped in the stock pages of Friday's newspaper."
I smell a dirty diaper.
An American, not US subject.
Apple now sweeps in & picks them up for pennies. Stockholders (aka Commers) get nada in the deal.
I'm going to get bitch-slapped for this, but here goes:
We know that Apple plays ball with the government surveillance apparatus. We know Apple just announced that the are going to put customer controlled encryption on their devices that will make it much harder for the DC US Stasi to monitor people. We know that the DC US Stasi and their pol and crat puppets were not too pleased.
What if Apple said, "Throw us a bone, like giving us our screen manufacture nearly free, and we will make things easier for you?" Those in the know pump it and then dump it right before it goes tits up, and then Apple swoops in for the kill/deal?!
Don't know, but then MH-17 was shot down by "pro-Russian rebels" with a missile and Robbie Parker misses his daughter.
An American, not US subject.
( Commoners)
I've cone to respect the number ZERO.
still HEDGE it ...
channel been stuffed?
garden variety recessions are (too much) inventory led
High yield credit is supposed to be high yield to allow for situations like this.
YouTube - Dr Leonard Horowitz Emerging Viruses AIDS & Ebola Nature, Accident or Intentional YouTube
Dive in with an open mind of course.
Another business where profits are limited only by demand.
Another financial shell game called; Duck, duck, goose.
http://en.m.wikipedia.org/wiki/Duck,_duck,_goose#/image/File:Duckduckgoo...
"Another financial shell game called; Duck, duck, goose. "
I actually picture a huge room with a gigantic table surround by chairs with music blaring in the background. Sheeple are tepidly walking around the table eying the one open chair while carefully monitoring the music much to the amusement of the already seated pols, crats, and banksters.
An American, not US subject.
"I like Duck, Duck, Guillotine."
i'll bet the ceo's personal liquidity is just fine bitchez
Tyler: Write an article about todays Fed escipades.
They lowered the USDJPY tractor whilst keeping VXX <30 (slowed them up they had to raise tractor) and not losing much on futures.
To give them same effect on futures with the tractor even with lower USDJPY, they tested it thru day.
You know they ram rodded tractor Friday whiel killing Gold. Ran out of room on the tractor.
Abe doesn't want the tractor more than 110 http://tinyurl.com/my4xxgf
Oh yeah also include how they use the tractor to raise futures this effects ASIAN markets at appropriate time.
They also raise tractor when European markets open to effect Europe markets. I guess you knew that already.
"Say tractor again, MFer"
"The complete GTAT Ex-Parte motion to preserve the company's biggest remaining asset, its NOLs:"
NOLs as assets?! Only the corruption of government could create such nonsense.
"The bad news, we lost money. The good news, we lost money and the NOLs make the company more valuable."
An American, not US subject.
"Government, being nothing more than a criminal syndicate of theft and violence, always accomplishes the opposite of the stated goal."
Great post. Not correcting you, just spelling out Net Operating Loss. Otherwise, it will fly over their peanut brain heads.
NOL's could be a new fruit drink or blood absorbing tampon. Winks.
Thanks for the info, Atomizer. Too many posters, and even Tyler, forget that we, their admiring reading audience, are, for the most part, dumbshits.
Sounds like they spent too much on production equipment and the engineers didn't deliver. The smart companies have figured it out. Spend their cash on stock buybacks instead of into that risky CAPEX thingy.
I suspect paragraph 18 tells the story. Changed its "model" at the behest of a major customer.
Amerikan Management Stronk.
iPissed
They should of been a Federal Reserve Member bank as well as a tech company.. Lesson here, start up the bank first before anything else..
Later stages of Ebola also have a liquidity crisis. So similar.
Stifel and Cowen were out of town at the time of the incident, look to the survivor with the discounted glass works
So, nobody in the repo market lent them money?
So, their cash flow was not enough for repo lending?
Hmmmm. NY Fed is draining dollars. People are afraid of releasing them
Don't be suprised if a "key customer" buys the whole company for pennies on the dollar.
They say financial reports are now supposedly written in plain English.
A fine example this is.
I have not been out of this business long enough, I still understand everything posted above.
Time for more beer and more time at the beach in SE Asia...
Liquidity Crisis? seems like GT and the Banks have something in common