GT Advanced Technologies (NASDAQ: GTAT) shocked the tech community by filing for Chapter 11 bankruptcy protection.
Bidness Etc . is reporting that yesterday, sapphire maker GT Advanced Technologies Inc (GTAT) and its subsidiaries filed for bankruptcy, causing its share price to plunge more than 90%. It came as a surprise that the company, which had seen quite a lot of action since Apple Inc.’s (AAPL) investment last year, filed for bankruptcy a month after the iPhone maker’s launch event.
At Apple’s September 9 event, GTAT’s sapphire was mentioned only for the Apple Watch, squashing rumors that the new iPhones will also sport sapphire display.
Though GTAT had factored in the impact of costs associated with the Arizona plant on its liquidity, it still expected revenues of $600-700 million for the full year. Sapphire, second only to diamond in hardness, was expected to do wonders for GTAT and the latest Apple iPhones. Unfortunately, sapphire became hard on GTAT. The company’s share price had gained more than 25% year-to-date before the bankruptcy filing.
Tom Gutierrez, president and chief executive officer of GTAT, said “GT has a strong and fundamentally sound underlying business.”
“Today’s filing does not mean we are going out of business; rather, it provides us with the opportunity to continue to execute our business plan on a stronger footing, maintain operations of our diversified business, and improve our balance sheet. We are convinced that the rehabilitative process of chapter 11 is the best way to reorganize, protect our company and provide a path to our future success. We remain committed to our roots in innovation and our diversification strategy”.
CNN Money is reporting that GTAT is currently holds $85 million, but under Chapter 11 backruptcy, can apply for debtor-in-possession (DIP) financing, meaning they can find new lines of operational financing to remain in business. These funding sources will enable GTAT to satisfy the customary obligations associated with the daily operation of its business, including the timely payment of employee wages and other obligations.
As a result of the filing, and as is customary with public companies, NASDAQ may temporarily halt trading in the company’s stock pending the receipt of additional information on the company’s financial condition. The company is cooperating with NASDAQ and will be providing any requested information as promptly as possible.
One question arises from all of this: why would Apple allow GTAT to think that the new sapphire technology would go into the iPhone 6 line and Apple watch, then pull it back from the iPhone 6 line? Is there, perhaps, an ulterior motive to Apple’s maneuverings? If GTAT cannot get out of bankruptcy, would they be for sale or takeover? Only time will tell. In the meantime, tell us what you think below.
[Image courtesy of Bidness Etc.]
