GT Advanced CEO faces scrutiny for selling stock ahead of Apple's sapphire-less iPhone 6 announcemen

Posted:
in AAPL Investors edited October 2014
The day before Apple announced the iPhone 6 and iPhone 6 Plus with glass screen covers, the CEO of GT Advanced Technologies sold $160,000 worth of his now-struggling company's stock, shares of which subsequently tanked due to the lack of a sapphire cover on the latest iPhones.




The cash-out by GT Advanced Technologies Chief Executive Tom Gutierrez occurred on Sept. 8, when shares of GTAT stock were priced at $17.38.

The very next day, Apple announced the new iPhone 6 and iPhone 6 Plus, which some observers were hopeful would feature sapphire screen covers made by GT Advanced. But the new iPhones instead feature ion-strengthened Gorilla Glass, and shares of GTAT immediately began to tumble.

The Sept. 8 transaction is now under even more scrutiny, after Gutierrez's company announced Monday it has filed for Chapter 11 bankruptcy court protection, sending shares of the company down over 90 percent to below $1. The CEO's $160,000 transaction was spotlighted Tuesday by The Wall Street Journal, which noted the sale date was seemingly uncharacteristic, with "no obvious pattern to his sales."

Gutierrez didn't sell any shares of GTAT in 2013, but has sold nearly 70,000 this year valued at more than $10 million. He made sales in the first three days of the month in May, June and July, but Journal reporter Daisuke Wakabayashi noted that the Sept. 8 sale date did not follow that same schedule.

For its part, GT Advanced says the CEO's sale was part of a pre-arranged plan established on March 14 of this year.




As of Tuesday afternoon trading, the price of GTAT has rebounded slightly, almost doubling its value from Monday. But it's still off considerably from the $11 range where it hovered after Apple's iPhone 6 announcement.

GT Advanced Technologies has said it plans to continue conducting business as usual as it attempts to "resolve its current issues." The company had $85 million in cash as of Sept. 29.

It was revealed in November 2013 that GTAT had won a $578 million multi-year contract with Apple to supply scratch-resistant sapphire material. Apple uses sapphire in its iPhone lineup to protect the rear-facing camera, as well as the Touch ID fingerprint sensing home button. It will also be featured in some -- but not all -- Apple Watch models when the wrist-worn device debuts next year.

Apple's mega-contract with GTAT led to hopeful speculation that the company might use sapphire to cover the entire screen of the iPhone 6. But although the material offers improved scratch resistance over competing Gorilla Glass, it's also more expensive and is prone to shattering when dropped.
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Comments

  • Reply 1 of 49
    maestro64maestro64 Posts: 4,909member

    There will be a lot more playing out with this story 

     

    http://www.bloombergview.com/articles/2014-10-06/apple-sapphire-supplier-breaks

  • Reply 2 of 49
    badmonkbadmonk Posts: 967member
    ahhh no big surprises here....move along people...nothing to see here...

    and no doubt there was some analyst collusion as well...to pump the stock up...

    seriously no one of average intelligence ever believed the iPhone 6 screen story
  • Reply 3 of 49
    slurpyslurpy Posts: 5,309member
    $160,000 worth of stock? As a CEO? Sorry, that's not that much money.
  • Reply 4 of 49
    fracfrac Posts: 480member
    GTAT "faces scrutiny..." "...now under even more scrutiny"
    It would be helpful to know by [I]whom[/I]?
  • Reply 5 of 49
    Would sapphire had really done sh** to improve the iPhone.
    Eventually new plastics will offier not only HD capabilities but will be virtually impossible to break.
  • Reply 6 of 49
    hngfrhngfr Posts: 72member
    AT the launch, Apple did not say the glass display is Gorilla Glass, also the iPhone 6 webpage does not say if it is or isn't, but we all know that it is Gorilla Glass ....... same argument can be said for the Apple Watch and non-crystalline metals, but we don't all know about that ;)
  • Reply 7 of 49
    nolamacguynolamacguy Posts: 4,758member
    Quote:
    Originally Posted by BadMonk View Post



    seriously no one of average intelligence ever believed the iPhone 6 screen story

     

    well thats a stretch. after the screen part was leaked in that video of the guy scratching and jabbing and trying to damage it to no avail, i thought it was possible they may. just like any rumor -- no one knows. 

     

    you're just using hindsight, now.

  • Reply 8 of 49
    Quote:
    Originally Posted by Maestro64 View Post

     

    There will be a lot more playing out with this story 

     

    http://www.bloombergview.com/articles/2014-10-06/apple-sapphire-supplier-breaks


     

    Behind that smiling antebellum Auburn facade is a stone cold killer. 



    If that story is true, Tim Cook is one B****d of a negotiator.  

    - We loan you ~$500M  for 2 years

    - Then you give us back the money in the form of discounts over 5 years on product you sell us out of our factory we built for you.

    - All product from said factory is the property of Apple, even if we choose not to buy it (you can't sell it to anyone else)

    - Oh, if you don't hit promised delivery requirements, we can demand immediate repayment of the loan.

     

    Basically, if you don't perform on our schedule, we'll call our loans, and leave you twisting in the wind with a pile of sapphire boules tied to your ankles,  you can only sell to us, if and when we want them.

     

    (My guess is that TSMC blew one too many quality/deadline requirements... Tim now says he gets the money he loaned you and the farm AND your first born if you miss a deadline)  

     

    Then the CEO starts selling shares on the eve of the iPhone 6 release, which will show to the world the glass is not sapphire.  Maybe not a huge amount, but given the 90% drop, well, the SEC and DOJ may threaten some Club Fed Time...

     

    If anything, all those DRAM vendors thinking they'll make Billions selling to Apple,  are now rethinking how easy money it will be.

    Steve was vengeful, But Tim, he gets it in writing up front. 

  • Reply 9 of 49
    nolamacguynolamacguy Posts: 4,758member
    Quote:

    Originally Posted by Slurpy View Post



    $160,000 worth of stock? As a CEO? Sorry, that's not that much money.



    yeah agreed; especially in light of $10MM in stock sales during 2013. $160k could be akin to his annual interest.

  • Reply 10 of 49
    Quote:

    Originally Posted by BadMonk View Post



    seriously no one of average intelligence ever believed the iPhone 6 screen story

     

    Quote:

    Originally Posted by NolaMacGuy View Post

     

    you're just using hindsight, now.


     

    and who says the investment community is at or above average intelligence?

  • Reply 11 of 49
    nolamacguynolamacguy Posts: 4,758member

    uh oh, looks like this will be another thread for sog to come in and bag on apple about. groan...

  • Reply 12 of 49
    Quote:

    Originally Posted by BadMonk View Post



    ahhh no big surprises here....move along people...nothing to see here...



    and no doubt there was some analyst collusion as well...to pump the stock up...



    seriously no one of average intelligence ever believed the iPhone 6 screen story



    I still don't understand what benefits Sapphire offered over Gorilla glass.

     

    Increased hardness (so lesser scratches) for greater brittleness (so greater chance of shattering). Sounds like a wash to me. In addition, it is significantly more expensive to manufacture.

     

    I can see Sapphire making sense for the Watch, if for no reason than the fact that it is pretty traditional in high end watches, and since the watch will be marketed more like jewelry than a device. I really don't see it making sense on the iphone.

  • Reply 13 of 49
    Quote:

    Originally Posted by TheOtherGeoff View Post



    If that story is true, Tim Cook is one B****d of a negotiator.  


    Why would anyone sign to those terms and conditions. Those are ridiculous. The GTAT CEO basically sold his company to Apple for pennies on the dollar (if they owe Apple money, as is indicated, they will probably try to repay in the form of assets, such as a certain foundry to create Sapphire glass. And they will do it for pennies on the dollar because Apple is pretty much the entire market for that foundry, so it is worthless to anyone else).

  • Reply 14 of 49
    maestro64maestro64 Posts: 4,909member
    Quote:

    Originally Posted by TheOtherGeoff View Post

     

     

    Behind that smiling antebellum Auburn facade is a stone cold killer. 



    If that story is true, Tim Cook is one B****d of a negotiator.  

    - We loan you ~$500M  for 2 years

    - Then you give us back the money in the form of discounts over 5 years on product you sell us out of our factory we built for you.

    - All product from said factory is the property of Apple, even if we choose not to buy it (you can't sell it to anyone else)

    - Oh, if you don't hit promised delivery requirements, we can demand immediate repayment of the loan.

     

    Basically, if you don't perform on our schedule, we'll call our loans, and leave you twisting in the wind with a pile of sapphire boules tied to your ankles,  you can only sell to us, if and when we want them.

     

    (My guess is that TSMC blew one too many quality/deadline requirements... Tim now says he gets the money he loaned you and the farm AND your first born if you miss a deadline)  

     

    Then the CEO starts selling shares on the eve of the iPhone 6 release, which will show to the world the glass is not sapphire.   That's looking like some serious Club Fed time.

     

    If anything, all those DRAM vendors thinking they'll make Billions selling to Apple,  are now rethinking how easy money it will be.

    Steve was vengeful, But Tim, he gets it in writing up front. 


     

    Believe it or not, this kind of deal is not to unusually for the Big company to strike with a suppliers. When you're at the top of the food chain, you can make suppliers do things which make no sense. No company is going to walk away from the table with Apple. Obviously this is bad end results but Apple has done it to other suppliers, this one just happen to have all its eggs in the apple basket.

     

    Apple did the same thing to Hitachi, convince them to install at costs of $100M's to put in 27 lines to build 1.8" hard drives for the Ipod classic only to turn around and do a deal with Samsung for NAND. Never told Hitachi they were changing direction. They did the same thing to the company that provide the click wheel and associated chip sets for this technology. They're doing it to Samsung, pull everything out of their component business and now Samsung business is hurting.

     

    Apple is ruthless this way, they not going to let what they did yesterday affection their decision moving forward. Too many company look at sunk cost and figure it not worth changing directions. 

  • Reply 15 of 49
    Quote:

    Originally Posted by Maestro64 View Post

    Apple is ruthless this way, they not going to let what they did yesterday affection their decision moving forward. Too many company look at sunk cost and figure it not worth changing directions. 

    I think Apple may have pushed their luck with GTAT a little too far.

     

    I'd imagine smaller suppliers will indeed start looking far more carefully at a contract with Apple in the future. Especially, if they already have a decent customer list.

     

    With Apple's size, they are really struggling to find the suppliers they need, so I wouldn't be surprised if the power dynamics in the Apple-suppliers relationship starts tilting slightly more towards the suppliers.

  • Reply 16 of 49
    maestro64maestro64 Posts: 4,909member
    Quote:

    Originally Posted by addicted44 View Post

     

    I think Apple may have pushed their luck with GTAT a little too far.

     

    I'd imagine smaller suppliers will indeed start looking far more carefully at a contract with Apple in the future. Especially, if they already have a decent customer list.

     

    With Apple's size, they are really struggling to find the suppliers they need, so I wouldn't be surprised if the power dynamics in the Apple-suppliers relationship starts tilting slightly more towards the suppliers.


    Highly doubt it, supplier will whore themselves out to a company like Apple, also my experiences very few supplier even the big ones have good legal support when doing deals. Even when they do the top guys tend to override what the lawyers say due the first item I pointed out.

     

    This situation with GTAT and Apple is not good for apple not matter how you look at, No companies want their supplier going into Bankruptcy, especially in the US, the courts take over and you loose all ability to negotiate with the supplier, you have to work through the courts.

  • Reply 17 of 49
    cm477cm477 Posts: 95member
    Quote:

    Originally Posted by NolaMacGuy View Post

     



    yeah agreed; especially in light of $10MM in stock sales during 2013. $160k could be akin to his annual interest.




    When you realize that your company will have to file for bankruptcy and you will probably faced a slew of shareholder lawsuits, you will scratch for every last penny you can get. He also sounds like high-flying CEO who probably would have spent quite a bit of that $10M to fit the part. The Bloomberg article is fascinating. He went for broke, but didn't disclose all the onerous terms to shareholders.

  • Reply 18 of 49
    jfc1138jfc1138 Posts: 3,090member
    Quote:

    Originally Posted by BadMonk View Post



    ahhh no big surprises here....move along people...nothing to see here...



    and no doubt there was some analyst collusion as well...to pump the stock up...



    seriously no one of average intelligence ever believed the iPhone 6 screen story



    The Apple patents for laminates incorporating Sapphire lent some basis for the speculation that was credible. For the 6 might have been premature but overall the newer technology (ion beam, laminates) had potential. Still has for that matter.

  • Reply 19 of 49
    jason98jason98 Posts: 766member
    Quote:

    Originally Posted by TheOtherGeoff View Post



    If that story is true, Tim Cook is one B****d of a negotiator.  

    - We loan you ~$500M  for 2 years

    - Then you give us back the money in the form of discounts over 5 years on product you sell us out of our factory we built for you.


     

    Let's stop here. Doesn't the bankruptcy mean Tim Cook can now say kiss good bye to his $500M?

  • Reply 20 of 49
    malaxmalax Posts: 1,598member
    Quote:

    Originally Posted by NolaMacGuy View Post

     



    yeah agreed; especially in light of $10MM in stock sales during 2013. $160k could be akin to his annual interest.


    Yes, but.

     

    Trading based on inside information is illegal, period.  Plenty of people get caught and spent time in jail for trades that were rather inconsequential for their own finances.  If I were his attorney I would certainly try to argue that this was simply a pre-programmed trade as part of a much larger liquidation strategy.  For his sake, I hope he has evidence to support that.  The other interesting factoid would be how many shares he retains today.  Did he basically dump all (or a sizable portion) of his shares over the past year knowing that the business is tanking, or did he only sell a small portion.  The former could be quite damning in a court of law.

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