GT Advanced Technologies sees shares crash as it files for Chapter 11 protection from creditors as cash runs low
Apple's Watch has a sapphire faceplate - but it's not clear whether GT Advanced Technologies is the only supplier
Apple's Watch has a sapphire faceplate - but it's not clear whether GT Advanced Technologies is the only supplier
The maker of the faceplates for the as-yet unreleased Apple
Watch, GT Advanced Technologies, has filed for voluntary bankruptcy
protection.
The company, which has set up a sapphire plant with Apple in Arizona, saw its shares fall more than 90% to 75 cents, wiping out about $1.4 billion in market value. The stock had traded as high as $20.54 in early July.
Despite rumours ahead of the launch of Apple’s new larger-screened iPhones, GT Advanced’s scratch-resistant sapphire glass was not used for the screens of the phones, of which up to 80m could be sold by the end of the year.
It is not known when Apple would have made the decision not to use GT Advanced’s materials for the screen, nor whether it has other suppliers of sapphire - a crystal of aluminium oxide which is one of the hardest materials known. If GT Advanced is its only supplier for the faceplate of the Apple Watch, Apple might have to help its supplier through bankruptcy or buy the company in order to safeguard that resource.
“It would appear that something very fundamentally broke down in the relationship between Apple and GT Advanced,” said Pavel Molchanov, an analyst at stockbrokers Raymond James.
Sapphire glass is scratch-resistant and nearly unbreakable, making it a potential alternative to Corning’s Gorilla glass, commonly used for smartphone displays.
Apple uses a sapphire screen for two of the three versions of its Apple Watch, which will not be available until early next year. The company also uses the material on the camera cover and fingerprint touch sensor button on its iPhones.
“It is a company that has had a good association with Apple. It was a darling a little while ago, so it’s definitely taking the market by surprise and taking individual traders by surprise,” said Dennis Dick, proprietary trader at Bright Trading LLC in Las Vegas.
Up to Friday’s close, GT Advanced shares had slumped 36% since 9 September, when Apple unveiled its latest iPhones, when its executives said the screens were “ion-strengthened” - but crucially, not sapphire.
GT Advanced was expecting a payment of $139m from Apple in October, it said on 5 August. Apple had made total payments of $439m as of that date.
The deal with Apple placed restrictions on GT Advanced selling sapphire for use in certain applications, according to the company’s regulatory filings.
The company granted Apple an exclusive license for certain applications of its sapphire glass technology, but the iPhone and iPad maker had no obligation to buy GT Advanced’s sapphire glass, according to the filings. It is not known whether Apple has other suppliers of sapphire ingots.
GT Advanced said in a regulatory filing in August that costs incurred in connection with the Arizona plant had a “significant impact on our liquidity and financial results.”
GT Advanced, whose subsidiaries also filed for bankruptcy, said it had $85m of cash as of 29 September. The company had cash and cash equivalents of $333.1m as of 28 June.
The company has reported a loss for the last four quarters, but raised the lower end of its full-year adjusted profit forecast in August, citing higher margins.
GT Advanced also makes equipment for consumer electronics, power electronics, solar and LED products. It said in its Chapter 11 petition that it had assets of $1.5bn and liabilities of $1.3bn as of 28 June.
The company, which filed for bankruptcy in a US bankruptcy court in the District of New Hampshire, said it was seeking debtor-in-possession financing to get access to additional funds.
GT Advanced said it expected the court to authorize it to continue to conduct business as usual while it reorganized.
The company’s shares had more than doubled in the nine months between last month’s unveiling of the new iPhones and Nov. 4, when the Arizona plan was first announced.
By 11:10 a.m. ET, more than 21 million shares had changed hands, making it the most actively traded on Nasdaq, but the stock had been halted five times due to excessive volatility.
The company, which has set up a sapphire plant with Apple in Arizona, saw its shares fall more than 90% to 75 cents, wiping out about $1.4 billion in market value. The stock had traded as high as $20.54 in early July.
Despite rumours ahead of the launch of Apple’s new larger-screened iPhones, GT Advanced’s scratch-resistant sapphire glass was not used for the screens of the phones, of which up to 80m could be sold by the end of the year.
It is not known when Apple would have made the decision not to use GT Advanced’s materials for the screen, nor whether it has other suppliers of sapphire - a crystal of aluminium oxide which is one of the hardest materials known. If GT Advanced is its only supplier for the faceplate of the Apple Watch, Apple might have to help its supplier through bankruptcy or buy the company in order to safeguard that resource.
“It would appear that something very fundamentally broke down in the relationship between Apple and GT Advanced,” said Pavel Molchanov, an analyst at stockbrokers Raymond James.
Sapphire glass is scratch-resistant and nearly unbreakable, making it a potential alternative to Corning’s Gorilla glass, commonly used for smartphone displays.
Apple uses a sapphire screen for two of the three versions of its Apple Watch, which will not be available until early next year. The company also uses the material on the camera cover and fingerprint touch sensor button on its iPhones.
“It is a company that has had a good association with Apple. It was a darling a little while ago, so it’s definitely taking the market by surprise and taking individual traders by surprise,” said Dennis Dick, proprietary trader at Bright Trading LLC in Las Vegas.
Up to Friday’s close, GT Advanced shares had slumped 36% since 9 September, when Apple unveiled its latest iPhones, when its executives said the screens were “ion-strengthened” - but crucially, not sapphire.
GT Advanced was expecting a payment of $139m from Apple in October, it said on 5 August. Apple had made total payments of $439m as of that date.
The deal with Apple placed restrictions on GT Advanced selling sapphire for use in certain applications, according to the company’s regulatory filings.
The company granted Apple an exclusive license for certain applications of its sapphire glass technology, but the iPhone and iPad maker had no obligation to buy GT Advanced’s sapphire glass, according to the filings. It is not known whether Apple has other suppliers of sapphire ingots.
GT Advanced said in a regulatory filing in August that costs incurred in connection with the Arizona plant had a “significant impact on our liquidity and financial results.”
GT Advanced, whose subsidiaries also filed for bankruptcy, said it had $85m of cash as of 29 September. The company had cash and cash equivalents of $333.1m as of 28 June.
The company has reported a loss for the last four quarters, but raised the lower end of its full-year adjusted profit forecast in August, citing higher margins.
GT Advanced also makes equipment for consumer electronics, power electronics, solar and LED products. It said in its Chapter 11 petition that it had assets of $1.5bn and liabilities of $1.3bn as of 28 June.
The company, which filed for bankruptcy in a US bankruptcy court in the District of New Hampshire, said it was seeking debtor-in-possession financing to get access to additional funds.
GT Advanced said it expected the court to authorize it to continue to conduct business as usual while it reorganized.
The company’s shares had more than doubled in the nine months between last month’s unveiling of the new iPhones and Nov. 4, when the Arizona plan was first announced.
By 11:10 a.m. ET, more than 21 million shares had changed hands, making it the most actively traded on Nasdaq, but the stock had been halted five times due to excessive volatility.
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