Some of you told me not to jump to conclusions but that is what they are.
They basically sacrificed the common shareholders (made them lose 95% of their investment) in order to renegotiate with Apple.
Bunch of CROOKS that deserve to be thrown in jail.
You don't say your company has a STRONG BALANCE SHEET and a strong CASH and REVENUE position on August 26th and then go BANKRUPT 6 weeks later. They FLATOUT lied to investors and should be thrown in jail.
So its bad deal they SIGNED????
Not for the CEO who cashed in on $10,000,000 in stock options this year.
If this is correct, then I wholeheartedly agree about the CEO.
Reminds me of a guy who had his friend call his loan officer and tell them he'd like to "walk away from the loan" and ask if that would that be possible.
To quote Babbage: I am not able rightly to apprehend the kind of confusion of ideas that could provoke such a question.
Whoever's job at AI it is to monitor 9to5 for stories (since they're usually first to break stories) must've missed it when they saw, rewrote and quickly posted the U2 album download story just prior to the GT Advanced story.
Apple believed GT could do what they promised... are they schmucks? IMO- It sounds like it was just a bridge too far in glass tech. They tried, couldn't do it. Isn't this why we praise private industry/capitalism?
Those criticizing GT should wait until more details come out.
It's possible that Apple imposed 'heads we win, tales you lose" requirements on a company that desperately needed its business. A failure on Apple's part meant no penalty. A failure on GT's was to be punished brutally. The only out for GT might have been this bankruptcy.
Also, keep in mind that sapphire production on this huge a scale is new. All sorts of gotchas can come up. Apple is as likely to be as much as fault for not planning for them as GT.
Um. They still signed the contract. If they had doubts, they shouldn't have signed it.
I wonder if characterizing the contract as "oppressive and burdensome" represents a violation of their non-disclosure clause?
How did it implode for GT Advanced?
a) They signed a deal. b) Their CEO sold a block of stock, clearly knowing that he was going to be unable to deliver on the terms of the deal. c) They didn't deliver on the terms of the deal. d) Apple withheld a payment that depended on those terms. e) They declare bankruptcy, blaming Apple and the withheld payment. f) Their shareholders lose >90% of their equity value. g) They escalate the bankruptcy into a plant closure in Massachusetts? h) They float a meme about Apple's "oppressive and burdensome" terms as the reason for the whole mess.
If Apple wants the sapphire from this manufacturing process, they should buy the Mesa plant (which is already permitted, staffed, and equipped), and bring in real people to run it. Alternately, they should pull all of their equipment out of the plant and move it to any place where they can get the product.
Here's my wholly speculative sense of what happened. GT Advanced tried to play chicken with Apple, relying on their sense that Apple has a very limited ability to deal with production delays or the time cost of retooling. So they calculatedly pressured Apple's plan for a sapphire iPhone launch, only to find that Apple was perfectly happy to switch to a producer who wasn't playing games - Corning, or whoever is building the screen glass on the production phones. So Apple played chicken right back, and withheld the final loan payment (which must have been in the original contract). Apple makes better chicken. :-)
Incidentally, I wonder if GT Advanced and their shenanigans may be part of the explanation for bend-gate, because the pre-production prototypes might have had more structural rigidity due to the sapphire screen? Apple had to switch to a different glass product for production, and bend-gate caught them by surprise.
OK, well it appears Apple will be acquiring a sapphire factory legally mandated via GT's dissolution. I feel awful for GT's employees and shareholders. Sounds like Tom Guitirrez, GT's CEO, is a con man. The bankruptcy Court need to clawback the 10 mil shares he sold and redistribute to GT's stockholders.
So GT is playing the sympathy card trying to make Apple look like the bad guy? :no:
Seems like It. They willingly agreed to terms they couldn't keep up with. Apple will be fine in regards to the whole need for sapphire. And as I understand it they fronted the cash to build the Arizona plant so they could conceivably claim it's not a GT asset since the loans weren't paid back. Keep it running themselves, which might be what they mean by the jobs comment.
Yes that would be $11,235.96 each employee. But, after the lawyers get thru it will be $0 for employees and share holders and the CEO will get to keep his 10 million
Also, keep in mind that sapphire production on this huge a scale is new. All sorts of gotchas can come up. Apple is as likely to be as much as fault for not planning for them as GT.
Apparently Apple did. By including a clause that they could buy from whomever they liked. So if GT couldn't keep up, Apple could go elsewhere
Some of you told me not to jump to conclusions but that is what they are.
uh, guy? words have meanings. signing onto unfavorable terms, perhaps even foolish terms (we don't know the details), doesn't make one a fraud nor a crook. those words have very different meanings.
also -- the plural of fraud is frauds. it's not possessive nor a contraction.
My whole point in calling GTAT CEO a fraud is because he broker securities laws.
You don't go from saying the company is SUPER healthy and PROFITABLE (he said this on August 26th) and than 6 weeks later you are BANKRUPT. That would be okay if the CEO filed reports with the SEC disclosing cash flow problems BEFORE going bankrupt.
You can't go from a PROFITABLE outlook to BANKRUPT in 6 weeks without disclosing information to the shareholders. This fraud is up there with Enron.
The CEO broke SEC securities laws. He's a crook and should be thrown in jail.
You must be right. It's a legal duty to produce accurate results and forecasts. Which they manifestly did not do. Both the CEO and the CFO should be investigated by the SEC and Justice.
Anyone who has worked in manufacturing will find the following senario as possibe. GTA enters into a contract to supply sapphire to Apple for Touch ID's and the unannounced AppleWatch. GTA experiences technical issues in production and is unable to solve them by the time Apple has to pull the trigger on production of the watch. Apple has to go somewhere else for the sapphire. GTA now loses a large inveestment because it has no orders to pay for all the costs. This can happen quickly and could have happend after reporting stable financials. Now if the CEO suspected that the problems would not be solved because the investment to fix them would eat all the profits and that is why he started dumping the stock, then he is in a world of hurt with the SEC.
It should warn about loss of revenue from Apple. I have not read it but I will.
Using chapter 11 seems really unusual if you had a large bank balance. It shouldn't be used to get out if contracts but to stop predator creditors exploiting a cash flow problem. I doubt if Apple were calling in debts, it looks like they were just withholding money.
Anyone who has worked in manufacturing will find the following senario as possibe. GTA enters into a contract to supply sapphire to Apple for Touch ID's and the unannounced AppleWatch. GTA experiences technical issues in production and is unable to solve them by the time Apple has to pull the trigger on production of the watch. Apple has to go somewhere else for the sapphire. GTA now loses a large inveestment because it has no orders to pay for all the costs. This can happen quickly and could have happend after reporting stable financials. Now if the CEO suspected that the problems would not be solved because the investment to fix them would eat all the profits and that is why he started dumping the stock, then he is in a world of hurt with the SEC.
As sog said there should have been a warning between August and now. Furthermore it was probably likely in august that they weren't getting this contract. The whole thing stinks.
Ok here is the opening paragraph from the 10-Q. It's fairly honest.
Since the Company's subsidiary, GTAT Corp. entered into the Master Development and Supply Agreement (“MDSA”), facility lease and related agreements with Apple Inc., on October 31, 2013, the Company has expended significant capital resources in order to fund the establishment of its sapphire growth and fabrication facility in Mesa, Arizona ("the facility"). During the three and six months ended June 28, 2014, the Company incurred significant costs in connection with (i) the purchase, installation and qualification of production equipment and related production processes, and (ii) inventory losses and production inefficiencies to date at the facility. Such inventory losses and production inefficiencies are discussed in additional detail below within Note 2, Significant Accounting Policies under the heading Sapphire Production Ramp Up Costs . The capital resources expended in connection with the purchase and installation of production equipment and the costs incurred in commencement of operations have had a significant impact on our liquidity and financial results.
For the three month period ended June 28, 2014, the Company recorded a loss from operations of $ 84,405 and a net loss of $ 86,381 . For the six month period ended June 28, 2014, the Company incurred a loss from operations of $ 139,043 , a net loss of $ 127,778 , and used $ 102,380 in cash for operating activities.
Under its Prepayment Agreement with Apple (as described in Note 3, Significant Agreements), the Company is required to repay the Prepayment Amount (as defined in Note 3, Significant Agreements) ratably (on a quarterly basis) over a five year period beginning in January 2015, either as a credit against amounts due from Apple's purchases of sapphire goods under the MDSA or as a direct cash payment. The Prepayment Amount is non-interest bearing. The Company’s obligation to repay the Prepayment Amount may be accelerated under certain circumstances, including if the Company does not meet certain operating metrics or financial covenants. See Note 3 for additional information on the Prepayment Agreement.
The Company is currently in compliance, and based on the Company’s operational plans and financial forecasts, the Company expects to maintain compliance with the operating metrics and financial covenants in the Prepayment Agreement and management believes that the Company will have sufficient cash resources to fund operations for at least the next twelve months.
The last bit is the problem. Was the company really in compliance? If not that's fraudulent.
I'm beginning to wonder if there are provisions in the contract that would "hand over" the IP and the facilities in case of bankruptcy. This is somewhat common in contracts which would mean that GTA's only fighting position would be to point the finger at Apple in the hopes of saving their company.
I'm betting this is what happened and why Apple made a very odd public statement a few days ago on the matter. I wouldn't be surprised to hear that Apple has taken over these two plants and that they own them outright after this is all over.
There is a statement regarding default from a section titled "risk related to our business" from their 10-k filing,
"Without significant sapphire revenue from Apple, we would still be required to repay in cash (on a quarterly basis) significant amounts of the Prepayment Amount beginning in 2015, which would limit our ability to invest in or operate other portions of our business, including our equipment operations, or to repay indebtedness at the time of maturity of such indebtedness. In addition, these repayments may exhaust all of our cash and,if we are unable to make a payment when due (or fail to meet our supply obligations), we will be in default and Apple will have the right to acquire control and possession of the ASF systems and/or our subsidiary (GT Advanced Equipment Holding LLC) that owns these systems (and to be paid in cash for any deficiency). The prepayment installments from Apple may also be cancelled prior to payment, or repayment accelerated, under certain circumstances, including if the ASF systems do not generate sapphire material to specification prior to an agreed upon date or we are unable to comply with certain financial requirements."
Comments
I told you GTAT was full of FRAUD's and CROOKS.
Some of you told me not to jump to conclusions but that is what they are.
They basically sacrificed the common shareholders (made them lose 95% of their investment) in order to renegotiate with Apple.
Bunch of CROOKS that deserve to be thrown in jail.
You don't say your company has a STRONG BALANCE SHEET and a strong CASH and REVENUE position on August 26th and then go BANKRUPT 6 weeks later. They FLATOUT lied to investors and should be thrown in jail.
So its bad deal they SIGNED????
Not for the CEO who cashed in on $10,000,000 in stock options this year.
If this is correct, then I wholeheartedly agree about the CEO.
Reminds me of a guy who had his friend call his loan officer and tell them he'd like to "walk away from the loan" and ask if that would that be possible.
To quote Babbage: I am not able rightly to apprehend the kind of confusion of ideas that could provoke such a question.
I don't understand they turtle speed AI is doing on posting news. This story is yesterdays news, almost literally:
http://9to5mac.com/2014/10/09/wsj-apple-deal-with-gt-advanced-broke-down-over-inability-to-provide-iphone-6-displays/
Whoever's job at AI it is to monitor 9to5 for stories (since they're usually first to break stories) must've missed it when they saw, rewrote and quickly posted the U2 album download story just prior to the GT Advanced story.
Businesses fail often.
http://www.statisticbrain.com/startup-failure-by-industry/
Apple believed GT could do what they promised... are they schmucks? IMO- It sounds like it was just a bridge too far in glass tech. They tried, couldn't do it. Isn't this why we praise private industry/capitalism?
Um. They still signed the contract. If they had doubts, they shouldn't have signed it.
How did it implode for GT Advanced?
a) They signed a deal.
b) Their CEO sold a block of stock, clearly knowing that he was going to be unable to deliver on the terms of the deal.
c) They didn't deliver on the terms of the deal.
d) Apple withheld a payment that depended on those terms.
e) They declare bankruptcy, blaming Apple and the withheld payment.
f) Their shareholders lose >90% of their equity value.
g) They escalate the bankruptcy into a plant closure in Massachusetts?
h) They float a meme about Apple's "oppressive and burdensome" terms as the reason for the whole mess.
If Apple wants the sapphire from this manufacturing process, they should buy the Mesa plant (which is already permitted, staffed, and equipped), and bring in real people to run it. Alternately, they should pull all of their equipment out of the plant and move it to any place where they can get the product.
Here's my wholly speculative sense of what happened. GT Advanced tried to play chicken with Apple, relying on their sense that Apple has a very limited ability to deal with production delays or the time cost of retooling. So they calculatedly pressured Apple's plan for a sapphire iPhone launch, only to find that Apple was perfectly happy to switch to a producer who wasn't playing games - Corning, or whoever is building the screen glass on the production phones. So Apple played chicken right back, and withheld the final loan payment (which must have been in the original contract). Apple makes better chicken. :-)
Incidentally, I wonder if GT Advanced and their shenanigans may be part of the explanation for bend-gate, because the pre-production prototypes might have had more structural rigidity due to the sapphire screen? Apple had to switch to a different glass product for production, and bend-gate caught them by surprise.
OK, well it appears Apple will be acquiring a sapphire factory legally mandated via GT's dissolution. I feel awful for GT's employees and shareholders. Sounds like Tom Guitirrez, GT's CEO, is a con man. The bankruptcy Court need to clawback the 10 mil shares he sold and redistribute to GT's stockholders.
Seems like It. They willingly agreed to terms they couldn't keep up with. Apple will be fine in regards to the whole need for sapphire. And as I understand it they fronted the cash to build the Arizona plant so they could conceivably claim it's not a GT asset since the loans weren't paid back. Keep it running themselves, which might be what they mean by the jobs comment.
Apparently Apple did. By including a clause that they could buy from whomever they liked. So if GT couldn't keep up, Apple could go elsewhere
I told you GTAT was full of FRAUD's and CROOKS.
Some of you told me not to jump to conclusions but that is what they are.
uh, guy? words have meanings. signing onto unfavorable terms, perhaps even foolish terms (we don't know the details), doesn't make one a fraud nor a crook. those words have very different meanings.
also -- the plural of fraud is frauds. it's not possessive nor a contraction.
My whole point in calling GTAT CEO a fraud is because he broker securities laws.
You don't go from saying the company is SUPER healthy and PROFITABLE (he said this on August 26th) and than 6 weeks later you are BANKRUPT. That would be okay if the CEO filed reports with the SEC disclosing cash flow problems BEFORE going bankrupt.
You can't go from a PROFITABLE outlook to BANKRUPT in 6 weeks without disclosing information to the shareholders. This fraud is up there with Enron.
I'm sure you have done this by now...
http://www.sec.gov/complaint/select.shtml
http://www.fbi.gov/contact-us
Let us know how it works out... seriously.
You must be right. It's a legal duty to produce accurate results and forecasts. Which they manifestly did not do. Both the CEO and the CFO should be investigated by the SEC and Justice.
Here's the 10-Q.
http://investor.gtat.com/secfiling.cfm?filingID=1445305-14-3496&CIK=1394954
It should warn about loss of revenue from Apple. I have not read it but I will.
Using chapter 11 seems really unusual if you had a large bank balance. It shouldn't be used to get out if contracts but to stop predator creditors exploiting a cash flow problem. I doubt if Apple were calling in debts, it looks like they were just withholding money.
As sog said there should have been a warning between August and now. Furthermore it was probably likely in august that they weren't getting this contract. The whole thing stinks.
Since the Company's subsidiary, GTAT Corp. entered into the Master Development and Supply Agreement (“MDSA”), facility lease and related agreements with Apple Inc., on October 31, 2013, the Company has expended significant capital resources in order to fund the establishment of its sapphire growth and fabrication facility in Mesa, Arizona ("the facility"). During the three and six months ended June 28, 2014, the Company incurred significant costs in connection with (i) the purchase, installation and qualification of production equipment and related production processes, and (ii) inventory losses and production inefficiencies to date at the facility. Such inventory losses and production inefficiencies are discussed in additional detail below within Note 2, Significant Accounting Policies under the heading Sapphire Production Ramp Up Costs . The capital resources expended in connection with the purchase and installation of production equipment and the costs incurred in commencement of operations have had a significant impact on our liquidity and financial results.
For the three month period ended June 28, 2014, the Company recorded a loss from operations of $ 84,405 and a net loss of $ 86,381 . For the six month period ended June 28, 2014, the Company incurred a loss from operations of $ 139,043 , a net loss of $ 127,778 , and used $ 102,380 in cash for operating activities.
Under its Prepayment Agreement with Apple (as described in Note 3, Significant Agreements), the Company is required to repay the Prepayment Amount (as defined in Note 3, Significant Agreements) ratably (on a quarterly basis) over a five year period beginning in January 2015, either as a credit against amounts due from Apple's purchases of sapphire goods under the MDSA or as a direct cash payment. The Prepayment Amount is non-interest bearing. The Company’s obligation to repay the Prepayment Amount may be accelerated under certain circumstances, including if the Company does not meet certain operating metrics or financial covenants. See Note 3 for additional information on the Prepayment Agreement.
The Company is currently in compliance, and based on the Company’s operational plans and financial forecasts, the Company expects to maintain compliance with the operating metrics and financial covenants in the Prepayment Agreement and management believes that the Company will have sufficient cash resources to fund operations for at least the next twelve months.
The last bit is the problem. Was the company really in compliance? If not that's fraudulent.
There is a statement regarding default from a section titled "risk related to our business" from their 10-k filing,
"Without significant sapphire revenue from Apple, we would still be required to repay in cash (on a quarterly basis) significant amounts of the Prepayment Amount beginning in 2015, which would limit our ability to invest in or operate other portions of our business, including our equipment operations, or to repay indebtedness at the time of maturity of such indebtedness. In addition, these repayments may exhaust all of our cash and,if we are unable to make a payment when due (or fail to meet our supply obligations), we will be in default and Apple will have the right to acquire control and possession of the ASF systems and/or our subsidiary (GT Advanced Equipment Holding LLC) that owns these systems (and to be paid in cash for any deficiency). The prepayment installments from Apple may also be cancelled prior to payment, or repayment accelerated, under certain circumstances, including if the ASF systems do not generate sapphire material to specification prior to an agreed upon date or we are unable to comply with certain financial requirements."
So are they trying to use chap 11 to avoid this?