SEC Investigating GT Advanced's Trading Activity

[rdlink]

Yes. Heaven forbid that an executive isn't shielded from poor business decisions.

In any case, let us wait and see what the SEC comes up with. If they are found guilty, then they should be sentenced to spend an hour in a locked room with the 700 employees that were laid off.

I agree that we should wait for them to be convicted before we start doling out punishment. But I have to wonder why people think that the 700 laid off workers are somehow a byproduct of any potential insider trading these guys may have done.

Simple fact is that the loss of these jobs is a result of a poor business decision: The investment in a manufacturing process that was not proven, and some mis-management of the business. I'd say incompetency and hubris are likely the largest reasons for the employees being laid off. Not what you want in your leadership, but certainly not illegal.

Now, the insider trading stuff? That's scummy and sleazy. If they're guilty of that the victims are investors, not the employees.

 

[69Mustang]

Well done to the SEC. These executives are downright thieves and total scumbags. I personally have lost over $100k on GT and these gangsters were merrily telling folk in their quarterly reports that everything was progressing fine. All they were doing was supporting their own position. If I walk into a shop and rob $1000 worth of goods I'll probably get well punished for it. These board members steal , yes STEAL millions. They deserve a very lengthy jail term at the very least with all insider transactions voided.

If you lost over $100K on one stock then you have only one person to blame, and it's not the execs at GT. It's you. You accept the risks and rewards for investing in the market. Speaking of... why would anyone invest in this company when their background contains this:

"One other thing to take into account that I hadn't even realized before: I have no idea what the detailed financials of GTA are, but if you look at their annual financial statements, in 2011 they grossed about $900M with a profit of $175M; in 2012 they grossed $955M with profit of $183M; in 2013, they grossed $298M and came up $82M in the hole--a precipitous 70% decline in gross revenue. Part of their shortfall was due to increase in R&D spending, but there was also a drastic falloff in sales in 2013. Q1 2013 (six months before the Apple deal) was, in fact, pretty much the worst quarter they had ever reported..." - excerpted from quote by forum member Makosuke

Their financials were readily accessible so if you invested in this company...

http://investor.gtat.com/results.cfm

 

[HyperZboy]

Being investigated and being prosecuted are two different things.

Apple has been investigated several times in the past, even STEVE JOBS himself when Apple was about to go down the drain way way back.

How quickly the FanBois jump to defend Apple and slam the GT CEO. Some of the stock sales were planned far in advance. CEOs have more leverage with stocks than Martha Stewart who wasn't even involved with the company she got her inside trader info from. She was caught dead to rights. It's not the same thing here.

Keep in mind, Apple settled and dropped their onerous conditions on GT quite quickly and appear to be agreeing to lose some money here. Is it possible Apple didn't want those contract terms disclosed? Uh Huh. And Apple isn't even suing GT and says they're going to continue to work with them. Uh huh. Everyone seems to overlook that part.

 

[kas23]

I'm not sure about this one - I have a stock management strategy where I sell certain stocks just before quarter end / year end announcements, because history has shown that's when those stocks are highest and that's when I can sell most profitably. That's just strategy to maximize profits, not illegal.

There's nothing wrong about that at all, unless you're the CEO of the stock you are dumping. We don't know if these people did anything illegal, but it's suspicious enough to deserve the SEC's attention. I think we can all agree on that.

 

[AFDoc]

ah so youre an investigator on the case and know these the be the facts youre presenting them as? or are you just pretending you are?

just sayin.

LoL..... he's voicing his opinion like all the other people here..... His is JUST as valid as yours.... So maybe relax a bit?

Of course any logical person can draw the conclusion that the head honcho of a company should know that said company isn't doing well and took the opportunity to dump some stock and make some $$. I realize logic may not be strong with you but......

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Give me a break. The SEC might try to make and example out of these guys and they probably should.

Meanwhile the real criminals like Former AIG CEO Maurice “Hank” Greenberg are not only free but free to to sue the US Government because they gave $85B for his +/- $19B (and falling) POS company. Some names like Jaime Dimon and Lloyd Blankfein come to mind as better use of SEC resources.
The real crime these guys at GTA should be shackled for is failing to get me my Sapphire Glass on the iPhone 6.

Hear hear!!

 

[kas23]

Keep in mind, Apple settled and dropped their onerous conditions on GT quite quickly and appear to be agreeing to lose some money here. Is it possible Apple didn't want those contract terms disclosed? Uh Huh. And Apple isn't even suing GT and says they're going to continue to work with them. Uh huh. Everyone seems to overlook that part.

Because Apple has nothing to gain by suing them (especially since they filed for bankruptcy). However Apple thinks they've been wronged, they'll lose in the public's eye if they go after them. Apple, who sources their components and produces their products all in Asia, goes after one of their few domestic vendors. Classic David and Goliath story there.

 

[flyinmac]

hmm..... nope, no signs of insider trading here... I mean how could an executive from a failing company not know that the bottom was about to fall out.

I'm sure he sold them expecting that the company's value was going to remain high

Think this one's gonna be expedited to the "duh, obvious department"

 

[randian]

Now the claim here is that these guys did schedule sales, but _after_ they already knew that the shares would drop. If the SEC can prove this, they are in trouble.

You are allowed to trade knowing material non-public information if you follow the rules. I don't think it matters if you know, or believe you know, where the stock price is headed. If it did you would be unable to trade at all.

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CEOs have more leverage with stocks than Martha Stewart who wasn't even involved with the company she got her inside trader info from. She was caught dead to rights.

Stewart was never convicted of insider trading. She was convicted for lying to a Federal investigator. The insider trading case was DOA, they had no real evidence for it, that's why they punted and went with the lying charge.

 

[HyperZboy]

You are allowed to trade knowing material non-public information if you follow the rules. I don't think it matters if you know, or believe you know, where the stock price is headed. If it did you would be unable to trade at all.

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Stewart was never convicted of insider trading. She was convicted for lying to a Federal investigator. The insider trading case was DOA, they had no real evidence for it, that's why they punted and went with the lying charge.

Insider trading is very difficult to prove. That she lied to investigators is what always gets you. This is nothing new.

It's never the original charge/scandal that gets you. It's the getting caught LYING ABOUT IT that gets you caught.

Everyone knows she did insider trading even worse than this GT guy. DUH!

 

[randian]

Insider trading is very difficult to prove. That she lied to investigators is what always gets you. This is nothing new.

Yes, but the lie wasn't about insider trading. If it were they would have used it to convict her on insider trading charges.

 

[X-X]

Let's be honest...who would wait until their stock becomes worthless?

It's shady what they did, but it's also daily routine when it comes to the stock market.

The stock market IS shady.

 

[AppleDApp]

I'd like to see them get out of bankruptcy only to get my money back.

 

[vpndev]

Not saying this isn't suspicious, but basic rules of diversification suggest that an executive needs to sell a portion of the stock compensation that he has. If 95% of this guy's wealth is in the same company stock that pays his salary, he should always want to sell some of it. You also wouldn't want almost all your eggs in that one basket. And as GT's stock went up, this guy's wealth became more and more concentrated in it.

Diversification is indeed good. And many Apple execs practice it.

But trading based upon insider knowledge, or planning future trades based on insider knowledge, is illegal. Whether the news is good or bad doesn't matter - if it's not publicly known then you can't make trading decisions based on it. If you do, you go to jail.

The only surprise here is that the SEC has moved as quickly as it has. Typically it takes longer to prepare a case. Maybe this means that the case is really quite solid.

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No:


These were planned sales, well in advance of actual events. I think it's tricky saying they leveraged insider knowledge - I would probably have done exactly the same thing: set up a large sale just before the announcement (and possibly a sale afterwards, as well), to hedge against possible market disappointment.

Again, I'm not saying everything is hunky-dory, just that this is not necessarily a slam dunk case of illicit activity.

These were planned sales, as you say. But the plan was filed shortly after production problems became known internally at GTAT (according to reports). If the SEC subpoenaed GTAT's emails, for example, and found that the production problems did in fact pre-date the sales plan ... that would be rather bad.

 

[vpndev]

Insider trading is very difficult to prove.

That's true. But usually that is because someone passed on information to someone else and that trail can be very hard to find and follow. That's why analysts and traders have mandatory collection of all their phone calls, emails, tweets etc etc. The SEC wants that.

But this case is a bit different. This is not information that was passed to someone outside the company. Instead, it was known by the CEO and others shortly before the sales plan was filed. Their only defense, as far as I can see, it to claim that the info about production problems "wasn't that bad" or something like that, and that they were certain that they would be fixed.

This will be a real "Hail Mary" if they try it. The thing that would have helped is if they had sought and received legal advice about the sale, and the lawyer said that it was OK. Since there has been no mention of it I assume that they neglected this [dumb].

Based upon the admittedly scant information we have, I believe these two are toast.

 

[iMcLovin]

I hope they'll be put to justice, but I expect they will go free. Its obviously insider trading, no matter what they are saying. They knew they wouldnt be able to deliver what they signed up for and that the stock was reflecting GT having a big deal with apple, despite the reality was that they were close to bankrupt all the time...which they waited to announce till right after the iphone release.

 

[CFreymarc]

I'll be watching this closely.

With a big bowl of popcorn in our laps.

 

[gnasher729]

You are allowed to trade knowing material non-public information if you follow the rules. I don't think it matters if you know, or believe you know, where the stock price is headed. If it did you would be unable to trade at all.

And that's what I said. What they did would normally be the way how to follow the rules. However, if they had insider information so they would know many months ahead that some events would happen, then these scheduled sales might not be enough to follow the rules. If they knew "we know already that we can't make these sapphire crystal, but we can keep it secret until October and then the **** will hit the fan", then scheduling sales at that point is _not_ going to protect them.

Let's be honest...who would wait until their stock becomes worthless?

It's shady what they did, but it's also daily routine when it comes to the stock market.

The stock market IS shady.

The answer to your question is very simple: Anyone who doesn't want risking a long jail time, and losing the money anyway plus a huge fine. Let's say the share price is $100 now, you are the CEO and you know there will be news coming out next week that makes the share price drop to $10. You sell a million shares for $100 million today. They will put you into jail, and take $90 million away from you, plus you will be made to pay a huge fine.

 

[HyperZboy]

That's true. But usually that is because someone passed on information to someone else and that trail can be very hard to find and follow. That's why analysts and traders have mandatory collection of all their phone calls, emails, tweets etc etc. The SEC wants that.

But this case is a bit different. This is not information that was passed to someone outside the company. Instead, it was known by the CEO and others shortly before the sales plan was filed. Their only defense, as far as I can see, it to claim that the info about production problems "wasn't that bad" or something like that, and that they were certain that they would be fixed.

This will be a real "Hail Mary" if they try it. The thing that would have helped is if they had sought and received legal advice about the sale, and the lawyer said that it was OK. Since there has been no mention of it I assume that they neglected this [dumb].

Based upon the admittedly scant information we have, I believe these two are toast.

If the stock sales were prescheduled before they knew Apple was not buying the product, they're in no trouble at all. The devil will be in the details. Ironically, Apple is helping them out by continuing to work with the company.

 

[maflynn]

How the CEO unloaded his stocks did seem quite suspicious, I doubt they'll be able to get him though. Folks like this are usually pretty slippery.

 

[acctman]

sadly this is what happens when you do business with American companies. And people wonder why US company go out side of the US for parts and labor. Too much greed here in the US.

 

[TallManNY]

Diversification is indeed good. And many Apple execs practice it.

But trading based upon insider knowledge, or planning future trades based on insider knowledge, is illegal. Whether the news is good or bad doesn't matter - if it's not publicly known then you can't make trading decisions based on it. If you do, you go to jail.

The only surprise here is that the SEC has moved as quickly as it has. Typically it takes longer to prepare a case. Maybe this means that the case is really quite solid.

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These were planned sales, as you say. But the plan was filed shortly after production problems became known internally at GTAT (according to reports). If the SEC subpoenaed GTAT's emails, for example, and found that the production problems did in fact pre-date the sales plan ... that would be rather bad.

Yep, definitely illegal to trade on insider information. But it seems so hard for the CEO to not have inside information. I guess you set up your advance sales (and completely lock them in for a long time into the future) on the day your public company does a complete public disclosure like a quarterly report. I've never really known how these things work. But I do know that executives, rationally, have to sell their own company stock when they are getting paid in vast quantities of it.
Side note, not selling your company's stock is sort of insider trading as well. But of course legal. In the case of Apple executives at the highest level, they probably have insight into products years ahead of their production. They might hold the stock based on that insight, thereby getting huge returns on that investment. I can't see any way to make that illegal.

 

[skinned66]

I'm sure the SEC will find that the stocks in question were just oppressive and burdensome.

 

[tbrinkma]

Not much to know really.

If you trade shares based on insider knowledge, you are in trouble.

The way around this if you are a permanent "insider" is to schedule share trades long time ahead. Like Tim Cook could schedule a sale of 100,000 AAPL shares for October 3rd, 2015. He then has to make that trade, even if he knows that news will get out on October 4th that sends the stock up, or if he knows that news will get out on October 2nd that sends the stock down, and selling on the 3rd is a really bad idea. (In my company most people are not allowed to trade between end of the quarter and two days after the quarterly results are released to the public).

Now the claim here is that these guys did schedule sales, but _after_ they already knew that the shares would drop. If the SEC can prove this, they are in trouble.

If I'm understanding correctly, the issue isn't with the scheduled sales so much as the lack of reporting on the issues that they knew about since Feb, combined with the announcement of the bankruptcy filing immediately *following* the last scheduled trade. Basically, that they kept the stock artificially high to maximize the profits from those scheduled sales, and then made the announcements which tanked the stock value.

 

[k1121j]

i so called it XP

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To me the whole thing was deliberate from the very start
1 enter in to a contract you can fulfill
2 stock goes up
3 start selling stocks
4. file for bankruptcy once the sour deals is made public

 

[Antares]

Could we get someone who knows nothing at all about insider trading laws to offer some commentary on this?

How would that be of benefit? If anything, we should get someone knowledgable on the subject to better frame what happened into the proper context with the laws.