GT Advanced CEO Sold Off Stock Ahead of iPhone 6 Announcement

[BJMRamage]

Several of my friends who use iPhones and iPads did not know about the upcoming iPhone 6 announcement, just saying. And I'm glad that your grandmother knows much more about technology than some other elders that I know...

Maybe that poster's grandmother watches the NEWS. the national NEWS was reporting that Apple would release larger iPhones, (2 of them) with sapphire screens and curved display and even showed the mockups, i think stating the camera bulge and antenna lines.

I was watching it, this was the SATURDAY CBS Morning news. and was wondering why they didn't say "reportedly" or anything like that. They kept saying Apple WILL BE releasing these next week.

So, maybe the grandmother is a NEWS watcher. I like to watch the news sometimes and this was reported.

 

[springsup]

So Apple had 10s of millions of gorilla glass screens just waiting in the wings and didn't decide until a few weeks before production that they wouldn't be using sapphire screens? I have a hard time believing that.

Maybe the sapphire model was supposed to be a premium version. In any case, Apple would have prepared contingency strategies. The way it would probably work is that they get lots of prototypes and make constant refinements to the materials and processes used (in the case of low yields, like what supposedly happened here). Then they will decide on a final design and mass production will begin. The announcement would probably happen some time after that once stock levels are high enough.

This is the rumour:

https://www.macrumors.com/2014/09/11/sapphire-display-iphone-6-missed/

“The plan as of several weeks ago was to include a sapphire covered iPhone 6 in yesterday’s launch,” said Matt Margolis, a senior research analyst at PTT Research and sapphire specialist who has been following Apple’s production closely. “The issue that emerged is that the finishers were still having trouble creating the sapphire edges and yields were only at 25% or less.”

“I have been told the issue was not on GT’s side of the house but solely resides within the finishers involved in the process,” explained Margolis. “My source also indicated that the yield issues can be addressed and worked out but it remains to be seen when Apple will release a sapphire covered iPhone.”

 

[ricktat]

If you own a chain of publicly traded coffee shops and there are rumors that Apple is going to give your shops free Ipads for customer use.

Your stock soars because of this rumor. You know it isn't true because you haven't even been contacted by Apple. So you sell your stocks a day before the big non-announcement. I would say that rumors can't hold you at fault. Now if you had signs up that said "coming soon Free Ipads" that would be different.

Going against someone else's speculation shouldn't be insider trading. No one from the company ever said they would provide Iphone 6 screens.

Now as far as the BK goes. This could be an argument. Did he know the news would force him into bankruptcy and he sold early. Or was he just trying to get top dollar for his stocks not thinking the bankruptcy was going to happen.

 

[JAT]

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.

Correct, but the phone's existence is not the point. The iPhone point is that it would NOT have sapphire, which would cause GT to take a huge hit.

Question is the timing of his knowledge and actions, which is up to the SEC to ask.

 

[Blorzoga]

[url=http://cdn.macrumors.com/im/macrumorsthreadlogodarkd.png]Image[/url]


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.

Along with the $160,000 he earned on September 8, 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.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."

Image​

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

Maybe he'll get Martha Stewart's old cell.

 

[macgabe]

Does anyone know what happened here? Will Apple own this company going forward? From memory Apple lent GTAT an interest free loan of c. $600M, but had no obligation to order from them, but GTAT did have an obligation to apple to supply product between a minimum and maximum quantity. And Apple also was allowed to call back the loan at any time. And GTAT was restricted in who else they could sell to, and also had to buy the equipment themselves to ramp up production. Also market cap around $1.2 bn with $1.4 in debt (not at all sure about those figures).

So then for some reason Apple doesn't use sapphire on the phone screens, but does use it on the watches. That doesn't seem surprising - after all they're going to go step by step with such a massive change to the screens. But something happens and Apple says they want their money back, and GTAT says well you'll have to prise it out of our cold dead hands. And on that note GTAT declares bankruptcy.

So now what? Presumably Apple is due most of the assets of the company (at least half). Nobody else will want the assets, other than possibly some IP, so Apple should get them cheap? The other creditors will only be interested in cash I expect.

And what went wrong? Did GTAT get all high and mighty, and forget who was boss, and start reneging on terms? Or when it came down to it they couldn't deliver on quality or quantity? Or did Apple give them the Heisman, when Corning, in a panic, offered them better terms on Gorilla Glass? Or does bankruptcy mean that GTAT gave Apple the Heisman and said if you're going with Gorilla glass you can kiss goodbye to that half a bil, cos we've spent it and we're going to declare bankruptcy and reemerge from chapter 11 debt free? Love to know the details.

Also, this was a widely touted "Apple ecosystem" stock. Jim Cramer on CNBC had it as his top pick just a few months ago earlier in the year. Did anyone here follow Jim Cramer and lose a few months' salary?

 

[budselectjr]

Because it was fact that the 6 was going to have sapphire screens.

If you "invest" soley on what you read on Macrumors then you deserved to lose every penny. Don't try this at home kids.

 

[theBB]

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 is not allowed to sell HIS stock unless he arranged the sale size, date and price (if it was a limit order) before he knew GT was not getting the account.

----------

Going against someone else's speculation shouldn't be insider trading. No one from the company ever said they would provide Iphone 6 screens.

GT provided earnings estimates that was obviously not going to pan out without getting the iPhone account. It was not just a rumor.

The company may have had confidentiality agreements that prevented it from disclosing that they lost the account before iPhone 6 intro event, but the CEO still needs to prove that he did not put in the sale order after he learned that they lost the account.

----------

I was about to say the same. Stock is making a strong recovery today in percentage terms even though in absolute terms it's still a fraction of what it was two days ago.

Otherwise known as "dead cat bounce".

 

[phillipduran]

I saw what you did there.. For the Alliance !!!!

Reality now :

Sounds like this guy was doing insider trading..That's a no-no.

http://knowyourmeme.com/memes/its-over-9000

I think what he did there was from before your reference.

 

[uwdude]

Actually, it looks like he planned this sale before the decision to go with glass and ramp up of production for the phones (although admittedly I don't know exactly what date they made the decision to go with glass instead). So he may have made these plans with the anticipation that the stock would be gradually going up as word got out that the iPhone was going to have sapphire screens, and didn't want to look like he was selling on the day of the announcement to maximize the selling price.

And then things went sour, with just weeks to go before the large production ramp up, and the Chinese plant announces they need more time to make the sapphire screens work, and Apple decides to go ahead with their announcement and can't wait for the sapphire (may not have known how long it would take at that time, even though later we know it ended up taking just a few weeks longer).

And then it *looks* like the GT Advanced CEO tried to sell right before the announcement, when that wasn't how it was planned to go at all, but it was too late to change the planned sale (or would have even looked worse like he was frantically trying to cover up, lol).

 

[bpeeps]

Lots of people in this post that think they are the Martha Stewart of insider trading knowledge.

 

[Dekema2]

That isn't as sketchy as selling off shares a month before filing for bankruptcy protection.

Either way, being an 18 year old in college with only a basic knowledge of macroeconomics, I think the guy needs to get locked up.

 

[techwhiz]

I said months ago on this forum that sapphire was not going to be used in a phone display.

Corning said the same thing. Unless someone made a revolutionary change in what sapphire is, you won't see it in a phone display.

In thin sheets it's brittle. Too brittle to even compare with Gorilla Glass 3.
Hard screen don't make them not brittle.

People who traded on speculation deserve to lose.
Nowhere did GT Advanced claim they would be making iPhone displays.

When Apple announced a wearable, I surmised the GT was making crystals for watches.

I'll see how it pans out. They never announced they would be supplying Apple. People assumed.

 

[ptb42]

Isn't this borderline insider trading since he knew the screens weren't sapphire?

No, that's the reason for the pre-arranged sale. There are certain periods when company insiders are allowed to sell shares, without being worried about accused of trading on non-public information.

By committing to the sale 6 months in advance, he has effectively immunized himself from insider trading -- unless the SEC can prove that he knew they wouldn't be able to provide the sapphire screens to Apple back in March.

----------

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.

No, the stock sale was arranged over six months ago. It was just now completed.

Six months ago, it was reasonable for him to believe the stock price would be much higher, especially since they had been forecasting substantially higher revenues at this time. If I remember right, that was public information about six months ago, in their annual or quarterly report.

----------

Since he's in a position to have that knowledge already, he can sell HIS stock.

No, SEC rules prohibit trading on non-public information. This is one of the reasons there are specific periods in a company's financial calendar when trading by insiders is prohibited.

----------

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.

Or, he expected they would be selling great quantities of screens for iPhones at this time, and timed the sale to reflect the expected higher stock price.

If I remember right, it was about March of this year when their annual/quarterly report forecast a large increase in revenue in the last part of 2014. Various analysts were trying to estimate how much sapphire it represented, and what iDevices would use it.

 

[rGiskard]

Actually, it looks like he planned this sale before the decision to go with glass and ramp up of production for the phones (although admittedly I don't know exactly what date they made the decision to go with glass instead). So he may have made these plans with the anticipation that the stock would be gradually going up as word got out that the iPhone was going to have sapphire screens, and didn't want to look like he was selling on the day of the announcement to maximize the selling price.

And then things went sour, with just weeks to go before the large production ramp up, and the Chinese plant announces they need more time to make the sapphire screens work, and Apple decides to go ahead with their announcement and can't wait for the sapphire (may not have known how long it would take at that time, even though later we know it ended up taking just a few weeks longer).

And then it *looks* like the GT Advanced CEO tried to sell right before the announcement, when that wasn't how it was planned to go at all, but it was too late to change the planned sale (or would have even looked worse like he was frantically trying to cover up, lol).

How do we know when he planned the sale? Any public info on it yet?

 

[ptb42]

Either way, being an 18 year old in college with only a basic knowledge of macroeconomics, I think the guy needs to get locked up.

You had better stay in school for a while. The article says the company has stated it was a sale pre-arranged 6 months ago. The WSJ used the term "in a filing", which usually means a report already filed with the SEC.

Unless you can prove that he knew the problems with sapphire would prevent them from being used in the iPhone 6 back then, he committed no crime.

 

[ellsworth]

People are getting the wrong idea of the whole "Insider Trading" speculation. He submitted his request to sell off his shares way back in March. The sale went through in September. That's a long ass time. It sounds like Apple decided not to go with Sapphire Glass last minute.

 

[ptb42]

How do we know when he planned the sale? Any public info on it yet?

You can check the filings for GT Advanced on Edgar (the SEC portal).

http://www.sec.gov/cgi-bin/browse-e...myowner=exclude&action=getcompany&Find=Search

This looks like the filing in question:

http://www.sec.gov/Archives/edgar/data/1325214/000148024814000162/xslF345X03/edgar.xml

You'll find this footnote:

2. This transaction was effected pursuant to a Rule 10b5-1 Plan adopted by reporting person on March 14, 2014 in order to implement a plan of financial diversification. Accordingly, the reporting person had no discretion with regard to the timing of the transaction. All sales by the reporting person are subject to the Issuer's equity ownership requirements.

I'm amazed no one else has bothered to look until now, especially with all the people accusing him of insider trading.

I'll also note that two other company officers sold shares in September, based on 10b5-1 plans that originated in December and May, respectively.

 

[jlake02]

Shady. Smart (assuming it was all within the rules of law) but shady.

 

[macaron95]

does Gutierrez love the color Orange ?

because i believe that's what he'll wear soon

 

[OatmealRocks]

Why you guys keep saying 9000 shares as if it wasn't a lot. That is his initial trade which amount to $160k. However in the article it states he sold more shares later which amount to $10million. This is a large amount and quite odd timing he sold before the BK11 announcement. Is it legal?

 

[senseless]

Also, this was a widely touted "Apple ecosystem" stock. Jim Cramer on CNBC had it as his top pick just a few months ago earlier in the year. Did anyone here follow Jim Cramer and lose a few months' salary?

That Cramer picture is too funny! My friend, who works in the mutual fund industry, told me "Don't do anything and don't listen to anyone". I think he's right.

 

[jclo]

This is poorly written article by Juli Clover.

This article implies that CEO did improper tradings.

As "chainprayer" astutely pointed out, this trading could be (and likely) from prescheduled 10b5-1 plan.

Juli Clover SHOULD have looked this up before writing this article. My guess, she did NOT.

Actually, if you read the post you will see that the quote from The Wall Street Journal CLEARLY states that it was a pre-arranged plan from March and does not imply that this purchase was improper (I didn't think it was necessary to repeat something that was clearly written in the quote). The WSJ does point towards continued stock sales all throughout 2014, however, adding up to $10M, contrasted with no stock sales in 2013.

Edit: I have updated the original article to make it more clear that this was a pre-planned sale, for readers who skimmed by the quote from The Wall Street Journal.

 

[OatmealRocks]

Does anyone know what happened here? Will Apple own this company going forward? From memory Apple lent GTAT an interest free loan of c. $600M, but had no obligation to order from them, but GTAT did have an obligation to apple to supply product between a minimum and maximum quantity. And Apple also was allowed to call back the loan at any time. And GTAT was restricted in who else they could sell to, and also had to buy the equipment themselves to ramp up production. Also market cap around $1.2 bn with $1.4 in debt (not at all sure about those figures).

So then for some reason Apple doesn't use sapphire on the phone screens, but does use it on the watches. That doesn't seem surprising - after all they're going to go step by step with such a massive change to the screens. But something happens and Apple says they want their money back, and GTAT says well you'll have to prise it out of our cold dead hands. And on that note GTAT declares bankruptcy.

So now what? Presumably Apple is due most of the assets of the company (at least half). Nobody else will want the assets, other than possibly some IP, so Apple should get them cheap? The other creditors will only be interested in cash I expect.

And what went wrong? Did GTAT get all high and mighty, and forget who was boss, and start reneging on terms? Or when it came down to it they couldn't deliver on quality or quantity? Or did Apple give them the Heisman, when Corning, in a panic, offered them better terms on Gorilla Glass? Or does bankruptcy mean that GTAT gave Apple the Heisman and said if you're going with Gorilla glass you can kiss goodbye to that half a bil, cos we've spent it and we're going to declare bankruptcy and reemerge from chapter 11 debt free? Love to know the details.

Also, this was a widely touted "Apple ecosystem" stock. Jim Cramer on CNBC had it as his top pick just a few months ago earlier in the year. Did anyone here follow Jim Cramer and lose a few months' salary?

Great incite thank you. Also I hate Jim Cramer, personally think he is border line fraudster.

 

[jclo]

You can check the filings for GT Advanced on Edgar (the SEC portal).

http://www.sec.gov/cgi-bin/browse-e...myowner=exclude&action=getcompany&Find=Search

This looks like the filing in question:

http://www.sec.gov/Archives/edgar/data/1325214/000148024814000162/xslF345X03/edgar.xml

You'll find this footnote:

2. This transaction was effected pursuant to a Rule 10b5-1 Plan adopted by reporting person on March 14, 2014 in order to implement a plan of financial diversification. Accordingly, the reporting person had no discretion with regard to the timing of the transaction. All sales by the reporting person are subject to the Issuer's equity ownership requirements.

I'm amazed no one else has bothered to look until now, especially with all the people accusing him of insider trading.

I'll also note that two other company officers sold shares in September, based on 10b5-1 plans that originated in December and May, respectively.

This is clearly stated in the original article in the quote from The Wall Street Journal. It was a pre-planned sale from March.