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Old Oct 7, 2014, 02:32 PM   #1
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GT Advanced CEO Sold Off Stock Ahead of iPhone 6 Announcement




GT Advanced CEO Thomas Gutierrez sold over 9,000 shares of GT Advanced stock just a day before Apple announced the iPhone 6, reports The Wall Street Journal. The September 8 sale netted him approximately $160,000 at an average price of $17.38, before the company's stock dropped 13 percent to $14.94 on September 9 after it became clear the iPhone 6 and iPhone 6 Plus did not include sapphire screens.

As noted by The Wall Street Journal, though the timing is suspect, the September 8 sale was part of a pre-arranged Rule 10b5-1 Plan enacted in March, according to SEC filings. Along with the $160,000 he earned on September 8, however, Gutierrez sold shares on several other occasions throughout 2014, earning him more than 10 million dollars as GT stock rose on rumors that Apple would use its sapphire for the new iPhones. In comparison, the CEO did not sell any of his shares in 2013.
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In a filing, GT said Gutierrez's share sale was part of a pre-arranged plan put in place on March 14, 2014. But there was no obvious pattern to his sales.

In May, June and July, Gutierrez sold shares within the first three days of the month. But then he didn't sell additional shares until Sept. 8, two days after he received 15,902 previously restricted shares. (Gutierrez forfeited the remaining 6,670 shares to cover tax obligations.)
GT Advanced filed for Chapter 11 bankruptcy protection on Monday, promising to continue operations as it goes through a transitional phase to reorganize its business. "Today's filing does not mean we are going out of business," said Gutierrez. "Rather, it provides us with the opportunity to continue to execute our business plan on stronger footing, maintain operations of our diversified business, and improve our balance sheet."

Apple and GT Advanced first partnered in late 2013, with Apple building a 700-employee manufacturing facility in Mesa, Arizona that's run by GT Advanced. The deal also saw Apple funding GT's purchase of furnaces and other sapphire-making equipment through a $578 million loan, doled out over several months and subjected to certain capacity requirements.

Under the terms of the agreement between Apple and GT Advanced, GT Advanced is required to pay back the $578 million loan over the course of five years. If the loan is not paid back, Apple is entitled to the equipment that GT Advanced purchased. When a deal was struck between the two companies, GT Advanced noted that sapphire production for Apple would result in substantially lower gross margins, but was confident that a recurring revenue stream would be beneficial for growth in the long run.

Apple was widely expected to include sapphire display covers from GT Advanced on some iPhone 6 models, and it is unclear why sapphire was not used at all. GT filings did, however, suggest that the company saw poor sapphire yield rates, which may have impacted Apple's decision to stick with alternate materials. Apple is not subjected to any type of commitment to purchase sapphire from GT Advanced, and though the Apple Watch does indeed include a sapphire cover, it is unclear whether the sapphire being used is sourced from GT.

GT's stock dropped approximately 90 percent after the company's bankruptcy announcement and has seen little gain since then.

Article Link: GT Advanced CEO Sold Off Stock Ahead of iPhone 6 Announcement
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Old Oct 7, 2014, 02:33 PM   #2
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sold over 9,000 shares
IT'S OVER 9000!!!! On topic: This is interesting. I still want to see what Apple will use sapphire for after all these rumors (just the watch or the phones too?).
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Old Oct 7, 2014, 02:33 PM   #3
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Isn't this borderline insider trading since he knew the screens weren't sapphire?
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Old Oct 7, 2014, 02:34 PM   #4
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CEOs doing sketchy things... what else is new?
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Old Oct 7, 2014, 02:36 PM   #5
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He sure would have piqued the SEC's interest.
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Old Oct 7, 2014, 02:36 PM   #6
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Something tells me the SEC is going to gut him. They should. As an accountant, it is obvious that he had prior knowledge of the upcoming Bankruptcy and iPhone 6 announcement. However, there should also have been provisions against him dumping his stock like this in the stock option agreements and as part of his contract.
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Old Oct 7, 2014, 02:37 PM   #7
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Old Oct 7, 2014, 02:39 PM   #8
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Well, that's encouraging news!!!
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Old Oct 7, 2014, 02:40 PM   #9
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Originally Posted by Dekema2 View Post
Isn't this borderline insider trading since he knew the screens weren't sapphire?
It would be insider trading if he told his family and friends to dump GTAT before the announcement. Since he's in a position to have that knowledge already, he can sell HIS stock.
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Old Oct 7, 2014, 02:42 PM   #10
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Yes, this smells of "insider trading" - but there is one big caveat...

Officers of publicly traded companies generally (*IANAL) have to report to the SEC that they are going to sell shares months in advance of the actual sale. They don't have to say *WHY* they are going to sell, but they do have to give notice. And that notice is public record. I don't have access to such databases where these are stored (usually they're behind paywalls, and we only hear about major corporate officers sales because there are reporters that dig in to this stuff for big companies - likely no reporter would care about GT Advanced.)

So it is likely that the CEO knew (or at least suspected) that they would be unable to supply sufficient quantities for the iPhone 6 months in advance, and planned the stock sale then.
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Old Oct 7, 2014, 02:43 PM   #11
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that is pocket change for someone in his position (but maybe all that was vested at that point)... and was probably 'ordered' long long time ago as required by law.

Still good that it is looked into if the law was followed.
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Old Oct 7, 2014, 02:44 PM   #12
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I'm pretty sure this is insider trading. I'm sure he has some backup-plan that provide it's not though... just to cover his a**.

Great CEO you have there.... taking shareholders money for personal gain while knowing the whole time your sapphire screens aren't working, then sending your company into BK11. If I was a shareholder I would be FURIOUS.
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Old Oct 7, 2014, 02:44 PM   #13
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Were there ever any credible rumors that the new iPhones would have sapphire displays? I know there was a lot of scuttlebutt but how much of it was credible?
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Old Oct 7, 2014, 02:44 PM   #14
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Originally Posted by Dekema2 View Post
Isn't this borderline insider trading since he knew the screens weren't sapphire?
That is why people in his position can't trade their company stock any time but only in certain well established windows and with long wait time between announcing and doing it - question is if he followed all those rules
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Old Oct 7, 2014, 02:45 PM   #15
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Originally Posted by Dekema2 View Post
Isn't this borderline insider trading since he knew the screens weren't sapphire?
That's what I was just thinking. The SEC and IRS will be interested in this.
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Old Oct 7, 2014, 02:46 PM   #16
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A nice shareholder's suit will be the cherry on top of that Chapter 11 filing.
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Old Oct 7, 2014, 02:46 PM   #17
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Something tells me the SEC is going to gut him. They should. As an accountant, it is obvious that he had prior knowledge of the upcoming Bankruptcy and iPhone 6 announcement. However, there should also have been provisions against him dumping his stock like this in the stock option agreements and as part of his contract.
My grandmother knew the iPhone 6 was coming out. That entire WORLD knew it was coming out. He knew Apple wasn't using the them for the iPhone as he runs the company that they would of bought it from.

Stock market 'analysts' (we know how good those guys are) inflated GT's stock based on rumors and he sold knowing full well that these rumors were false. Not his fault that price was inflated.
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Old Oct 7, 2014, 02:47 PM   #18
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They could have been sold as part of a 10b5-1 plan set up years ago.
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Old Oct 7, 2014, 02:47 PM   #19
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Quote:
Originally Posted by Anonymous Freak View Post
Yes, this smells of "insider trading" - but there is one big caveat...

Officers of publicly traded companies generally (*IANAL) have to report to the SEC that they are going to sell shares months in advance of the actual sale. They don't have to say *WHY* they are going to sell, but they do have to give notice. And that notice is public record. I don't have access to such databases where these are stored (usually they're behind paywalls, and we only hear about major corporate officers sales because there are reporters that dig in to this stuff for big companies - likely no reporter would care about GT Advanced.)

So it is likely that the CEO knew (or at least suspected) that they would be unable to supply sufficient quantities for the iPhone 6 months in advance, and planned the stock sale then.
That what it looks like to me also.

He didn't stand to loose either way since if they did well and provided sapphire screens then there was a good chance he would have turned a profit.
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Old Oct 7, 2014, 02:47 PM   #20
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That is why people in his position can't trade their company stock any time but only in certain well established windows and with long wait time between announcing and doing it - question is if he followed all those rules
Exactly, he had nothing to do with the stock price. It's these stupid analysts that see one deal and go on a whirlwind of assumptions which manipulate the stock price.
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Old Oct 7, 2014, 02:48 PM   #21
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It would be insider trading if he told his family and friends to dump GTAT before the announcement. Since he's in a position to have that knowledge already, he can sell HIS stock.
Precisely. He is also capped as to how much he can sell and even though 9000 shares is a lot, it's not all of his stock, nor a majority share. Selling larger chunks of stock requires notice to the SEC for someone in his position, as already pointed out by others. He probably knew the stock was going to take a nose dive when the iPhone 6 announced without the rumored sapphire display, so he cashed out what he could while the price was up. There's a good bet he filed notice of this sell off with the SEC before his company may have missed that supposed deadline to supply sapphire screens... The fact is, we don't know.

Is it a shady action? I suppose that's open for endless debate, but there doesn't seem to be any unlawful activity here. FWIW, there seems to be a lot of trading activity for GT Advanced the day before the iPhone reveal. Not reflected in overall numbers, but there was high buy/sell activity. In other words, lots of people attempting to cut potential losses and/ or hedge their bets. To be blunt, I probably would have cashed out too if I had owned some, even if believing the sapphire screen rumors to be true. The stock value had already become inflated prior to the Apple announcement.
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Old Oct 7, 2014, 02:48 PM   #22
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Originally Posted by l00pback View Post
It would be insider trading if he told his family and friends to dump GTAT before the announcement. Since he's in a position to have that knowledge already, he can sell HIS stock.
From the SEC website...

http://www.sec.gov/answers/insider.htm

Not sure where you're getting your interpretation from. Mine is that he's likely to have to answer some uncomfortable questions.

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Old Oct 7, 2014, 02:48 PM   #23
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We don't know the whole story yet.

But two points, since we're speculating:

- If GTA promised to deliver something they couldn't, forcing Apple to scrap a planned sapphire use, then that's on GTA. Not on Apple.

- Stocks are based on peoples' expectations more than on reality. Is GTA possibly suffering PURELY because the rumor echo-chamber went wild over fictions? That would have been frustrating for them to see! GTA couldn't talk about Apple's plans (or lack thereof) ahead of time to defuse the rumors. They would have just had to watch and cringe and wait for this inevitable day. Apple gets that kind of stock hit from made-up rumors all the time. A smaller company can't withstand the blow so well!

Either way, insider trading is insider trading--and the possibility needs to be investigated.

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Originally Posted by AlecZ View Post
sold over 9,000 shares
IT'S OVER 9000!!!! On topic: This is interesting. I still want to see what Apple will use sapphire for after all these rumors (just the watch or the phones too?).
They've used sapphire on the phones for years: for camera covers and TouchID buttons.

And last year, iPhone production was allegedly reduced (for a time) because TouchID production was bottlenecked. Similarly, iPads didn't get TouchID at all. Could the quantities of sapphire covers have been part of that problem? If so, Apple needed more sapphire even last year--to say nothing of this year with sales even higher, and TouchID coming to iPads.

Then add the watch!

Apple might have hoped to use even MORE sapphire (so rumors suggested), but their needs are massive and growing regardless.
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Old Oct 7, 2014, 02:48 PM   #24
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It would be insider trading if he told his family and friends to dump GTAT before the announcement. Since he's in a position to have that knowledge already, he can sell HIS stock.
No, he cannot. He is not allowed to trade on information that is not publicly available. That would be a felony.
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Old Oct 7, 2014, 02:48 PM   #25
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It would be insider trading if he told his family and friends to dump GTAT before the announcement. Since he's in a position to have that knowledge already, he can sell HIS stock.
NO he can't sell HIS stock whenever he wants - there are lots of rules and regulations for people that own stock and have inside information. Time will show if he followed those rules (innocent until proven guilty). There are usually only certain windows where he is allowed to trade and only if announced long enough in advanced (he has to file that way ahead of time with the SEC)
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