GT Argues Inability to Disclose Bankruptcy Details, Citing Confidentiality Agreements

[Gasu E.]

It seems that if Cue is as confident as he is about Apple's Fall prospects, why has HE cashed out of his stock?

Now click into Cook's shares. He's been selling off shares regularly for the last few weeks. Key word "disposition" (look it up if you need to). At the same time, he's been touting "best product pipeline ever". Why is he selling off shares?

Corporate executives are paid partly (in the case of top executives, mostly) in restricted stock. As the stock restrictions get fulfilled, typically vesting over a five year period, they sell the stock-- this is the same as cashing a paycheck for regular employees. Typically it has nothing to do with the prospects of the company, as the execs then get new restricted shares to replace the ones they sell. Corporations now routinely pay their execs mostly in restricted shares to align their own financial interests with those of the company.

 

[nikon1]

Well - I may be in the minority here - but I'm glad that my iPhone 6Plus will not have a sapphire screen! While it may be very scratch resistant, IMO, it's too easily shattered when dropped.

 

[joeblough]

Exactly, there's nothing wrong with selling stock in your company if that's what you want to do. These threads are all loaded with comments spinning it like it's a smoking gun.

there are different rules for insiders. if you have material, non-public information about the company's prospects, you are guilty of insider trading if you act on that information.

that's why all these guys have planned sales. if the sales were part of a schedule, then he's clean. if not, then he's in trouble.

 

[HobeSoundDarryl]

You can't buy a new Ferrari with AAPL stock. If you're paid mostly in stock options you're going to have to cash some of them out in order to actually buy stuff and pay your taxes. This is normal activity for the company honchos and it has been going on for years. And they have to file a plan to sell their stocks well ahead of time because they obviously have insider information. Guys at Cue's level are operating under a whole different set of rules than us commoners.

Corporate executives are paid partly (in the case of top executives, mostly) in restricted stock. As the stock restrictions get fulfilled, typically vesting over a five year period, they sell the stock-- this is the same as cashing a paycheck for regular employees. Typically it has nothing to do with the prospects of the company, as the execs then get new restricted shares to replace the ones they sell. Corporations now routinely pay their execs mostly in restricted shares to align their own financial interests with those of the company.

Fellows, you're missing the point. I think it's FINE for Apple execs to sell shares. It doesn't make them crooks or automatically means they see the future downfall of the company. I agree it's NORMAL.

To that though, it should be viewed as just as normal for this GT CEO to have sold his shares... maybe so he could buy his Ferrari or buy his house or pay his taxes.

The point is not finding fault with Apple execs for selling shares; its illustrating that since Apple execs sell shares maybe the GT CEO selling shares was not some conspiracy or shady move in anticipation of this bankruptcy. Instead, he's judged a crook seemingly based mostly on that while "we" jump to Apple Execs defense that it's normal for executives to sell shares.

 

[rtdunham]

They got screwed because they couldn't deliver what they contractually promised. If they bet the company on delivering, that's Apple's fault? Apple held a gun to their head and made them sign the contract?

But surely Apple's responsible for some due diligence and wouldn't invest that kind of money – and their plans for a critical new product – solely on the word of the manufacturer. They'd have investigated all of the details first, and satisfied themselves that the product would be delivered on time, no?

 

[gnasher729]

GT owes Apple over 500 million. Apple holding a payment isn't what screwed them over.

Old saying, slightly adapted...

If you owe Apple $5 million, you have a problem.
If you owe Apple $500 million, Apple has a problem.

 

[CalWizrd]

The public has the right to know the truth.

No, the shareholders have the right to know the truth.

 

[gnasher729]

Corporate executives are paid partly (in the case of top executives, mostly) in restricted stock. As the stock restrictions get fulfilled, typically vesting over a five year period, they sell the stock-- this is the same as cashing a paycheck for regular employees. Typically it has nothing to do with the prospects of the company, as the execs then get new restricted shares to replace the ones they sell. Corporations now routinely pay their execs mostly in restricted shares to align their own financial interests with those of the company.

There were always huge rumours spreading about Pixar, because their John Lasseter was exclusively paid in share options, and promptly turned them into cash - everyone screaming that he's an insider and his selling means the company will go bankrupt, when indeed he had to sell because otherwise he didn't have a penny to live on. (He made about $10 million a year so he had plenty of money, but only after selling his share options).

 

[Hitch08]

I find it hard to believe a company that size would obtain counsel that is not familiar with bankruptcy.

They didn't. He is a very highly regarded bankruptcy attorney. https://www.paulhastings.com/Professionals/details/lucdespins/

AFAIK (and noting I am not a lawyer), the Atomic Energy Act and associated NRC regulations are the only things a bankruptcy judge cannot examine/break/change at his discretion. Presumably there are some secret national security laws that fall into that category as well, but a confidentiality agreement with a consumer products company? I'd like to see a citation to the section that says that can be kept secret in BK.

That's not correct. Here is the code section you requested.

http://www.law.cornell.edu/uscode/text/11/107

Google is your friend.

 

[gnasher729]

Guys at Cue's level are operating under a whole different set of rules than us commoners.

The little guys in accounting live under the same rules as Cue in many companies, because obviously the little guys creating the quarterly reports know what's in it quite a while before ordinary people know it, and probably before Tim Cook and Cue.

 

[mbh]

The little guys in accounting live under the same rules as Cue in many companies, because obviously the little guys creating the quarterly reports know what's in it quite a while before ordinary people know it, and probably before Tim Cook and Cue.

Good point, but they aren't affected as much. If they're little guys then they aren't paid in millions of stock options which they then have to figure out how to deal with legally. They might have some ESPP shares or something, but nothing like the bigwigs.

 

[HobeSoundDarryl]

The rumor (which should be about as good as us convicting the CEO as "shyster", etc because he sold shares of the company) was that GT delivery was off by weeks. If true, Apple chose not to wait. Since Apple was the only customer and GT was locked into exclusivity to only Apple, this is where it goes.

I find myself imagining many pallets of 4.7" and 5.5" screens on a dock with nowhere to ship because the one customer opted to go with glass this time. OR, I picture a bunch of specialized machinery purchased to make 4.7" and 5.5" screens idle because the ONE customer does not currently want what they can produce. Staff to run those machines also idle. Passage of time driving a need to pay that staff even if they are idle.

Where else but bankruptcy could this go if that is as it really is?

Does that make it all or partially Apple's fault? Not necessarily. If it was weeks and Sapphire was very important to Apple, couldn't they have waited? If it wasn't weeks but more than that, couldn't Apple have released them from their exclusive arrangement so they could sell to someone else? Lots of possibilities for us speculators.

On the flip-side, the whole thing looks like a small company took a big gamble to try to go from little to big in one big hop. They missed their target(s) and their benefactor wasn't willing to wait for them. If it turns out they missed by weeks, another view of that would be that they barely missed. If so, that's a gamble that almost paid off huge.

In hindsight and now bankruptcy, the gamble was wrong... too big to handle. But if you were back in the time when the gamble was being weighed, it would be a situation where your small company could deliver a highly-touted part to Apple's most important product and your company could go from smallish to much bigger AND have the direct association with Apple. Who wouldn't take that chance if you were in their shoes?

 

[69Mustang]

Object lesson

This sad tale is an object lesson in diversification. Realistically, how else was this story going to end?

GTA had 1 customer. Only 1. Their fortunes were inextricably tied to, not only the success of Apple, but the whims of Apple as well. To top it off, they signed an extremely unbalanced contract with Apple. Seriously, how shortsighted must one be to sign something that basically says, "I'll help you but I am not obligated to buy your products and even if I don't buy your products you can't sell to anyone else." <--- Who would sign this? Only someone naive or looking for a short term gain. That was dumb.

From Apple's perspective it was a no lose proposition. I can't blame them at all. I would have done it too.

What if:
Everything goes perfectly and the iP6's come with sapphire screens. Then Corning comes up with GG that out performs sapphire at a substantial savings. Apple decides to go with GG for the 6S or 7. GTA will still be left holding a bag of sapphire with no buyer.

If this was a movie, Apple would play the part of mob boss and GTA would be cast as a business owner who just needs a small loan to help his business grow.

 

[samcraig]

there are different rules for insiders. if you have material, non-public information about the company's prospects, you are guilty of insider trading if you act on that information.

that's why all these guys have planned sales. if the sales were part of a schedule, then he's clean. if not, then he's in trouble.

So why is the CEO of GTS (on here) not getting the same benefit of the doubt than other Execs who sell stock on a schedule.

It really comes down to when the GTS CEO submitted his request to sell and what his reasons were.

Since that isn't public yet (is it?) There should be no reason to immediately assume something corrupt happened. But I guess many are just used to the notion that you're guilty unless proven innocent

 

[six2pel]

The public has the right to know the truth.

The Public 'CAN'T HANDLE THE TRUTH'

plus speculation is usually way more entertaining.

 

[yano729]

I bought stock in GTAT today as a complete gamble. I saw that it dropped 90% the day the bankruptcy was announced and the following day it went up 50%. The stock has been remained pretty stable the last two days. Interesting to see how this investment pays out. Ive never invested in a stock that has filed for chapter 11, anyone know of any trends for bankrupt companies stock?

 

[UnfetteredMind]

But surely Apple's responsible for some due diligence and wouldn't invest that kind of money – and their plans for a critical new product – solely on the word of the manufacturer. They'd have investigated all of the details first, and satisfied themselves that the product would be delivered on time, no?

I would surely hope they did and would be very surprised to find out they had not. That said, you can only do so much (like investigating potential construction contractors before having work done on your house) and you lay out all the details in the contract. I don't believe they would have invested if they didn't believe in the technology/capability GT showed prior to the contract being signed.

 

[HyperZboy]

Unfortunately for both Apple and GT, the Bankruptcy Court is going to put up with NONE of these shenanigans. This is one of those times where Apple won't be able to reimagine Steve Jobs Reality Distortion Field to get their desired outcome.

There's no way in hell the bankruptcy court will just hand over GT to Apple at pennies on the dollar just because they own and/or financed the entire plant and equipment. That would not be in the best interest of GT shareholders in any way shape or form. Plus the fact that Apple chose not to purchase ANY Sapphire glass afterwards is something the bankruptcy court will DEMAND to KNOW regardless of all of these Non-Disclosure agreements.

The fact that Wall Street and Apple both claimed to be shocked by the bankruptcy filing reeks of phoniness. No pun intended. In fact, from what I'm reading so far, the court is going to throw all of these agreements under the bus. THAT IS THE REASON WHY APPLE IS SURPRISED. For once their hush hush magic didn't work.

I'm not picking sides. But this has the makings of a really good reality TV show by bankruptcy standards, which are normally boring so I can't wait! LOL

 

[UnfetteredMind]

So why is the CEO of GTS (on here) not getting the same benefit of the doubt than other Execs who sell stock on a schedule.

It really comes down to when the GTS CEO submitted his request to sell and what his reasons were.

Since that isn't public yet (is it?) There should be no reason to immediately assume something corrupt happened. But I guess many are just used to the notion that you're guilty unless proven innocent

A number of us have indicated he may/should be investigated. The SEC would determine if anything illegal has occurred. If GT didn't report material information in their filings for example, that may mean it was withheld so the already scheduled share sales by the CEO could occur before the bad news hit (when in reality the stock would have fallen prior to that on the expectation that they wouldn't meet the requirements in the contract with Apple). Without the details, who knows

 

[SamuraiArtGuy]

Kinda airing the dirty laundry...

... in public.

But one of the best ways to hose your tech company is to get into a contract with Apple and fail to deliver a critical product or component. Apple plays hardball, and expects supply chain partners to live up to their standards and schedule. Not doing so will earn you a bitch-slap and beatdown. Maybe what's happening to GT is harsh, but if you're playing with Apple, bring your "A" Game.

You know the old production joke in printing and advertising? "Ya want it good, fast, and cheap? Pick two and call me back." Well, Apple actually pretty much wants that - not so much "cheap", they'll pay ya – but you better step up. And gods save you if you bust any non-disclosure clauses - you'll be DEAD to Apple.

To quote Gruber, "Apology accepted, Captain Needa."

 

[iMerik]

Honest question. Let's say GTAT is at $1.00. What are the primary reasons you should drop, say $500 on their stock right now? I think I'm mostly wondering what all does Chapter 11 mean for a company and its stockholders. If they will continue operating under Chapter 11, could one make a bet that they would eventually turn things around with sapphire for the Watch and maybe future iPhones or iPads? If that is the case, their stock could jump back up to $10 turning your $500 into $5,000.

Is that a dumb bet to make in and of itself, or does bankruptcy also do other things that you have to factor into the company's future and its stock?

 

[MikeSmoke]

If GT missed the deadline by only a few weeks, how was Apple able to get adequate supplies of Corning glass seemingly on a moments notice?

 

[69Mustang]

Honest question. Let's say GTAT is at $1.00. What are the primary reasons you should drop, say $500 on their stock right now? I think I'm mostly wondering what all does Chapter 11 mean for a company and its stockholders. If they will continue operating under Chapter 11, could one make a bet that they would eventually turn things around with sapphire for the Watch and maybe future iPhones or iPads? If that is the case, their stock could jump back up to $10 turning your $500 into $5,000.

Is that a dumb bet to make in and of itself, or does bankruptcy also do other things that you have to factor into the company's future and its stock?

I'm pretty sure getting stock advice from a tech forum would be considered a dumb bet.

Seriously, you're much better off with professional financial advice.

 

[Dinø]

The CEO obviously knew months in advance when the iPhone 6 would be announced. He also knew that it would not use sapphire. This is insider information that the general public did not know. The date of the sale alone suggests he was trying to maximize his earnings based on that knowledge.

 

[HyperZboy]

My theory is this...
Both companies took a big gamble and GT lost and was late technically on delivery, although the reports I'm reading are that they were not as far behind or technically off the mark either.

GT's gamble was to leverage the company on one sole buyer.

Apple's gamble was to use this investment as a means to control the Sapphire market from the likes of Samsung. People forget, GT claimed it's Sapphire product was not prone to the fragility of other sapphire ventures.

If GT failed in deadlines, Apple thought it could buy the company cheap.

Chapter 11 opens everything up to the public limelight, something Apple does not want and opens the possibility that someone else buys GT by simply paying Apple back for the investment through the bankruptcy proceedings.

The surprise by Apple is that under Chapter 11, all of these non-disclosure & other Apple agreements will have to be looked at. Not something Apple wanted for sure, ya think?