Monday's crazy bankruptcy announcement by GT Advanced (GTAT) will go down in the annals of business history, and it will be remembered by many future stock pickers.
I didn't have any stock exposure to it. In hindsight, it sure would have been nice to join the other 40+% of the float that was short it.
Going into the Apple (AAPL) event on Sept. 9, you knew that it was going to be a binary event: there was either going to be sapphire glass covers on the new iPhones or there wasn't. By the time the event wrapped up, and sapphire was only mentioned as part of the Apple Watch, GT's stock fade had begun from $17 to around $11 before the bankruptcy filing.
I grew suspicious of management by the long silence following the Apple event. No news seemed to be bad news. Then, we got word that there was supposed to be a business update in the last week of September. That week came and went. They said: ''wait until next week.'' The following Monday, the company filed for bankruptcy.
In GT's Form 10-Q from the second quarter, the company stated it believed it had sufficient cash to cover themselves for the next 12 months. During the August earnings call (three weeks before the Apple event), they reiterated their full-year guidance (which was heavily weighted to the fourth quarter, and 85% of that quarter's revenue was to be sapphire-related). On that call, GT's CEO also answered a question of their cash balances by saying that he didn't foresee a need to raise additional cash in a secondary in the second half of the year.
In the bankruptcy filing press release, I found that this company drew down its cash from over $300 million at the end of the second quarter to $85 million at the end of last week.
While all this happened, GT's CEO had been selling shares all throughout this year.
My best guess of what was going to happen was that GT was going to come out at their business update and say that they were cutting their guidance for the year. Maybe they'd also announce a secondary. In any case, I was thinking that might provide a great entry point to buy the stock following a big flush-out of all the retail investors who only owned the name for the hopes of inclusion in the new iPhones.
Apple is saying today that they, too, were surprised by GT's decision to file for bankruptcy. The demands for loan repayment didn't seem to be the trigger for bankruptcy.
What happened? Hopefully, we will start to find out tomorrow.
In any case, right now, GT's management looks nefarious at best, and incompetent at worst.
Congratulations to all those who had smelled something funny and shorted this.