Apple's Sapphire Partner GT Advanced Technologies Files for Bankruptcy

[jafingi]

What does this mean for the Apple Watch? Guess they're using GT sapphire for those too?

 

[tito2020]

When you try to impress a larger company and use all your resources that's what happens.

 

[HyperZboy]

The Apple FAN BOIS conjecture here is just hysterically funny. Let's recap...

#1 GT missed the deadline. Apple chose elsewhere. Now GT is broke.
#2 Sapphire glass is brittle and unusable and thus the contract with Apple is no good. GT is broke.
#3 GT jumped in with 2 feet with Apple and ran out of cash trying to supply the glass and Apple doesn't need the glass just yet. Once again, GT broke, their fault.

Get the picture? It couldn't possibly Apple's fault could it? And where is there any proof of any of this?
What if, dare I say it, APPLE SCREWED UP or planned this to buy Sapphire outright dirt cheap knowing they would run out of money and deliberately delayed Sapphire glass in the iPhone 6 while contractually keeping GT from selling it to anybody else?

OH HELL NO! NOT MY APPLE!
Well guess what? Filing for Chapter 11 has one added benefit. All contractural deals GT made will now be analyzed by the court and can be thrown out under certain circumstances. That part is a fact under Chapter 11.

So if you want to add another rumor, here's one... What if GT is not protecting the solvency of the company but instead just protecting itself FROM APPLE???

 

[Hitch08]

You are assuming too much. The idea is to restructure a business and allow it to pay its debt.

I don't remember saying that it was this magical thing where everyone ends up happy.

In a perfect world everyone would be paid back.... Unfortunately this is no perfect world. Don't be such a downer.

Here is your original post:

The simple version is that 11 keeps you in business and lets a court manage your debt so you stay in business and everyone (almost) gets paid back over time.

That is what I responded to. It's not a matter of being a downer. I didn't make any comments about things being magical or people being happy.

The only thing that I was responding to was your statement in bold above. It's misleading.

 

[Mtmspa]

IMO, and I have no idea if this is correct, due to Apple having GT Advaced sign the exclusive deal and gauranteeing sapphire business, Apple wasn't able to maintain their projected production volume of iPhone 6's, thus eliminating the sapphire glass from this device entirely. Since Apple wasn't placing the orders, GT Advcanced gets screwed.

(At least this is how it comes across to me.) If someone else has a better explanation, I'd love to hear it.

You serious bro?

 

[El Hikaru]

So, Apple did plan to use that new tech to iPhone 6.

 

[HyperZboy]

I must say, this is baffling on a number of levels.

This is a public company with a seemingly obvious ability to raise money had they needed it. There are an enormous number of crappy public companies out there, and they always seem to find investors willing to feed them $ in secondary offerings or PIPEs. See, for example, almost the entire biotech sector. If GT needed money to get them our of trouble, they likely would have been able to raise enough just by doing a simple road show and saying "Apple Partnership"....it would have been a done deal. Instead they choose to essentially wipe out equity investors? Doesn't add up.

Perhaps Apple over negotiated here, which put GT in a position where the terms of the contract were going to be so onerous going forward that there was no amount of $ that could save the shareholders. In that case, they may be hoping that the court will likely alter certain terms of the deal. That's the only thing I can think that makes sense here, because this company should have had absolutely no problem raising money in the capital markets. Perhaps this is a move to get Apple to buy them before the terms of the deal are invalidated by the courts.

Good points, but the possibility of the courts invalidating the Apple deal leads me to believe it's open season now on who buys GT, including Samsung, Nokia, etc. I don't see a scenario where Chapter 11 helps Apple really. It just brings in more competitors in the meantime in my opinion, unless Apple and GT already have a deal in place that both sides and the court would agree on before any other company gets involved. If that's the case, Apple would have to move very quickly on this.

 

[Eriamjh1138@DAN]

Bankruptcy means they burned through their cash trying to do business. They may have a huge apple contract that guarantees income, but costs to get there were not controlled or limited.

Problems leading up to shipping could have sunk them.

They could be weeks away from or even producing apple sapphire right now as we speak, but daily costs exceed income from Apple.

They want to stay in business. That's what chapter 11 allows them to do.

 

[NorEaster]

Goldfish memories

Holy cow folks... I love it how so many people here are quick to blame GT Advanced for this and defend Apple at all costs. Again, a great example of the rabid fanaticism that will bash anything / anyone / any company not called Apple.

Have you all forgotten this article?
https://www.macrumors.com/2014/09/11/sapphire-display-iphone-6-missed/

GT Advanced did not miss yields or production. Problems further down the supply chain caused issues for GTA. Could it be conceivable that GT Advanced is in trouble now because a) some downstream supplier can't take GTA's sapphire and produce the displays needed by Apple and b) GTA spent boatloads of cash to ramp-up sapphire production for Apple but now that Apple isn't/can't use it, GTA is going broke?!?!

Oh wait... this is Macrumors and I guess we
a) must have failed reading comprehension and/or forgotten what we read a month ago
b) must immediately go on the offensive and attack anything without an Apple logo

More like they didn't meet a deadline. Even if your a independent contractor, if you miss a deadline, that usually means you miss the pay.

How is that Apples fault if that company ******** up? Maybe that company did not deliver what was promised in the deal - or they went for too cheap in that exclusive deal?

Exactly, by missing a deadline they ****** Apple up.

Not if GT missed the deadline. Apple definitely had a demand that a certain amount of screens be available by a certain time (so as not to delay production). If GT couldn't hold up their end, there is no contract.

I still don't think it was Apple's first choice to have "ion strengthend glass" (lol), but GT missed a deadline and Apple had to move or risk delaying the launch.

This company has an exclusive contra with Apple.

The company didn't provide the goods as Apple requested.

The company lost money in such production.

iPhone 6 came out without their saphire glass.

They are broke.

 

[sidneyvanness]

Good points, but the possibility of the courts invalidating the Apple deal leads me to believe it's open season now on who buys GT, including Samsung, Nokia, etc. I don't see a scenario where Chapter 11 helps Apple really. It just brings in more competitors in the meantime in my opinion, unless Apple and GT already have a deal in place that both sides and the court would agree on before any other company gets involved. If that's the case, Apple would have to move very quickly on this.

I think we're saying the same thing. Apple clearly wants a deal with GT, as evidence by the fact that they already have a deal with them. If the courts were to come in and wipe out a deal they see as overly-burdensome (thereby opening it up to all other players), Apple might have the most to lose. GT has seemingly calculated that they can't honor the terms of the current agreement--this is the ultimate leverage out of that situation.

 

[Dave00]

GT's market cap at this point is totally meaningless. Anyone who buy stock in a bankrupt company is just begging to be zonked because their stock becomes effectively worthless the moment they file for bankruptcy.

This is something I've never understood. A company files for bankruptcy, yet their shares still are bought and sold, usually for less than a dollar. Thus, they retain *some* value, but why? It can't be that there are enough clueless investors that would hold onto worthless stock. There must be some chance of recovery of value even after declaring bankruptcy; perhaps this is on the chance of a legal challenge to the bankruptcy proceedings. I'm just speculating.

 

[kemal]

It's not like GT is going Chapter 7. And if their sole client is Apple, why isn't their stock shooting back up?

 

[paulrbeers]

Holy cow folks... I love it how so many people here are quick to blame GT Advanced for this and defend Apple at all costs. Again, a great example of the rabid fanaticism that will bash anything / anyone / any company not called Apple.

Have you all forgotten this article?
https://www.macrumors.com/2014/09/11/sapphire-display-iphone-6-missed/

GT Advanced did not miss yields or production. Problems further down the supply chain caused issues for GTA. Could it be conceivable that GT Advanced is in trouble now because a) some downstream supplier can't take GTA's sapphire and produce the displays needed by Apple and b) GTA spent boatloads of cash to ramp-up sapphire production for Apple but now that Apple isn't/can't use it, GTA is going broke?!?!

Oh wait... this is Macrumors and I guess we
a) must have failed reading comprehension and/or forgotten what we read a month ago
b) must immediately go on the offensive and attack anything without an Apple logo

Nope this was already mentioned several places in this thread. You just failed to read thru all. Further, using an article about rumors, in order to disprove other "rumors" is hardly fact....

just sayin'

 

[bpeeps]

Maybe they made huge investments in tech trying to get ready for the 6 line of phones, couldn't make it in time and now have no revenue.

Hold out for the 7 boys.

Hold out for Chapter 7 Bankruptcy? Cause I hate to tell you...

 

[IJ Reilly]

What you have seen or what you can remember are irrelevant, valueless contributions.

If the company is forced to sell all of its assets to settle liabilities and if all secured and unsecured liabilities cannot be met, which was true with GM, then stockholders will receive nothing. Nobody yet knows if GTAT is capable of raising debtor-in-possession financing to restructure its liabilities, though statements from the company state otherwise - which would be illegal for a company to say if not true, though unforeseen circumstances could change the outlook. IF GTAT raises enough financing to restructure its debt, then the company will return to normal operations and the stock will be listed once more. The uncertainty is what will happen during the bankruptcy proceedings. You are making spurious claims without valid premises. Here is your argument: I remember that most bankruptcies result in stockholders losing all of their money. GTAT filed for bankruptcy. Therefor, the stockholders of GTAT will lose all of their money. As is usual with syllogisms, your major premise is the crux and involves an extremely weak assumption: that what you remember or think you know is valid and applicable to this case.

I see, you can't name an example that proves me wrong, so you just say I am wrong. Nice. Your comments remind me of the old joke about the helicopter and Microsoft tech support: technically correct, but otherwise of no practical value.

For everyone else, equity in Chapter 11 public companies is not automatically wiped out, except for all practical purposes. Stocks of public companies filing for Chapter 11 drop to pennies on the dollar for good reasons. The reasons are: (1) Chapter 7 liquidation is a very real possibility, (2) the assets of the company can be sold off to satisfy creditors, and (3) the court can allow the company to reorganize under a new holding company, into which all assets and earnings are transferred. In all of these scenarios the current stockholders get little or nothing. This is why stock in GT fell by 90% the moment the bankruptcy was announced. Don't believe those who tell you it was essentially a coincidence.

 

[NorEaster]

I didn't fail to read through them all. I wanted to call out specific posts from folks who obviously didn't remember or read the prior article (and I wanted to provide a link to the article).

Nope this was already mentioned several places in this thread. You just failed to read thru all. Further, using an article about rumors, in order to disprove other "rumors" is hardly fact....

just sayin'

 

[NT1440]

This is a legal restructuring. Expect big things from GT given the $300+ million Apple has invested in sapphire infrastructure.

 

[IJ Reilly]

Well, no one should be relying on anonymous posts on a tech forum for investment advice.

In any case, though, I think what he was saying is that typically in a Chapter 11 filing, equity holders are wiped out. Not always, as American Airlines has shown. But in GM's Chapter 11, equity holders were wiped out, and many debt holders took losses. It was the same with Lehman Brothers.

DIP financing is provided to allow the company to continue operations, as the whole point of Chapter 11 is that creditors will maximize their outcome through the company continuing, rather than closing its doors and liquidating. The DIP financing ranks above other unsecured debt.

I haven't read any of the filings, but it's entirely possible that GT simply had a cash crunch because the use of its materials has been delayed, and is using Chapter 11 force restructuring of its debt to delay payments until the anticipated sales wave finally comes in.

Thank you for getting it.

----------

Not necessarily. Someone who bought American Airlines in the weeks after they filed for Chapter 11 and stayed around until they merged with US Airways made out like bandits.

A lot of smaller banks also used Chapter 11 after the financial crisis to restructure their preferred stock. Equity holders took a hit, but weren't wiped out entirely.

In this person's case, it's about a $400 bet, perhaps with better odds than a night at the poker table.

I'd go for the poker game, and I'm not good at poker.

----------

Bankruptcy means they burned through their cash trying to do business. They may have a huge apple contract that guarantees income, but costs to get there were not controlled or limited.

Problems leading up to shipping could have sunk them.

They could be weeks away from or even producing apple sapphire right now as we speak, but daily costs exceed income from Apple.

They want to stay in business. That's what chapter 11 allows them to do.

It is, but if their relationship with Apple was still going swimmingly, and they only needed a bridge loan, then Apple probably would have been their first stop. The filing tells me that none of their customers were prepared to float them.

----------

This is something I've never understood. A company files for bankruptcy, yet their shares still are bought and sold, usually for less than a dollar. Thus, they retain *some* value, but why? It can't be that there are enough clueless investors that would hold onto worthless stock. There must be some chance of recovery of value even after declaring bankruptcy; perhaps this is on the chance of a legal challenge to the bankruptcy proceedings. I'm just speculating.

Speculating is the perfect word. Delisted stocks for bankrupt companies trade for years after they are nothing but names listed on the Pink Sheets. The bottom line is you can always find someone to buy anything if they think the chances of making money exists, no matter how remote. Hell, people buy lottery tickets by the millions.

 

[sentiblue]

Apple should bail them out. God knows they have the cash to do it.

I definitely agree with you on this....

It's sad to see lots of GT employees loosing their jobs because the products they make didn't get to final destination due to the finishing process being delayed by a thirdparty company that couldn't live up to par in Asia....

It doesn't make sense to micro-manage for Apple... but I think if Mr. Cook had a closer look at the processes at GT and participated in discussions with thirdparty supply chain companies... this probably wouldn't have happened.

Unless.... near the end of readiness, they discovered that sapphire indeed had some issue...

On the stock front... When we found out on launch date that sapphire didn't make it... I knew GT stock would dip.... but I didn't expect 90%... that's just gonna hurt every single person at GT. It sucks to be them right now... but I hope the light at the end of the tunnel will be seen within a year when sapphire truely makes it on the iPhone/iPad next year....

 

[mdelvecchio]

So Apple basically has GT Advanced Technologies sign an exclusive agreement that they will only produce saphire for Apple's rumored iPhones and Apple Watches over the next five years at a high volume capacity, thus limiting GT's partnerships with virtually any other potential clients. Then GT suddely files for Chapter 11 bankruptcy due to not enough business continuity/cash flow.

http://investor.gtat.com/releasedetail.cfm?ReleaseID=804195

Did Apple inadvertantly screw their business partner by having them sign this exclusive contract? Should Apple at least explore a possible buyout of this company or at least license the tech?

Mixed feelings about Apple's business practices at times.

just hope you're feelings around based on your empty conjecture. you aren't on GT's board and have no idea what their finances are like or why.

----------

When Tim Cook woke up this morning, he wondered why there was egg all over his face.

what? that doesn't even make sense. this has nothing to do w/ Cook and he has no egg on his face -- just the best-selling smartphone in the history of our planet. again.

but yeah, keep trying to find ways to think thats a bad thing.

 

[Rogifan]

I definitely agree with you on this....

It's sad to see lots of GT employees loosing their jobs because the products they make didn't get to final destination due to the finishing process being delayed by a thirdparty company that couldn't live up to par in Asia....

What's your source for this?

 

[SoAnyway]

Great day if you were short GTAT.

 

[uwdude]

This is a good thing people, not a bad thing.
BTW time to buy GT stock. Its down to ~$1.

This. I just opened a trading account to try and see if I can get in on this- seems like a very good buying opportunity. I'm sure Apple will not let this company go down in flames after investing so much.

 

[MacFanBoi]

What if this was apples plan all along to get GT to get all the equipment ready for mass production then not have the product ready in time for release so they go bankrupt and apple can then snap up GT at a dirt cheap price.

 

[dustinsc]

Debtors, but not investors. Investors are dead meat.

Investors will definitely see their stocks tumble, but it's not as though they lose their shares. Equity creditors are still creditors, and even though they get last priority, if the company emerges profitably from chapter 11, the investors still get what they paid for.