GT Advanced Technologies (NASDAQ: GTAT): $1 million a day loss

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By Hanson So on October 14, 2014 Company, Consumer Staples, Technology & Software, Us News

GT Advanced Technologies (NASDAQ: GTAT) shocked the world, when it asked a bankruptcy court to fire 890 employees at its factory in Merrimack, New Hampshire – staff that was hired in anticipation of the Apple-Sapphire deal. This deal consisted of the company supplying sapphire glass screens for Apple’s mobile devices ranging from the Apple iPhone 6 to the iPad.

This request comes in turn due to the fact that they wish to close their factory production line in Mesa, Arizona as well – a vestige of their attempt to produce the glass themselves with Apple’s support and capture a significant share of the market. Prior to this, the company was just selling the machinery for other chemical producers to make glass.

In addition to this, they plan to shut down their Salem operations as well. But it’s questionable what will happen to their workforce in Nashua – which is their administrative office.

The result of these employees, factory, and an unfinished $578 million deal with Apple, is resulting in a million dollars a day loss for the equipment producer. This liquidity crisis has been preventing the company from recovering and continuing operations. By cutting down on this liquidity crisis, the company can regain its foothold and be able to restart business promptly again.

The company announced last Friday:

“Only if GT winds down these operations will it be able to stop its mounting losses and re-focus its resources on the operation of its core business of selling sapphire furnaces and other products”

GT Advanced Technologies (NASDAQ: GTAT) is interested in pursuing claims against Apple, terminating certain agreements that will provide no value, so they can shut down their factory operations pertinent to that agreements. Apple has strict non-disclosure and confidentiality agreements with GT Advanced Technologies (NASDAQ: GTAT) which prevents the company from disclosing the nature of their deal – a $50 million penalty per occurrence. As a result, the company cannot reveal sensitive information to equity and debt holders who are owed $600 million.

GT Advanced Technologies (NASDAQ: GTAT) seems like the victim in this legal drama and not the perpetrator according to experts. As the shares trend down below 39 cents, many are worried if a settlement can be reached. Speculators buying into the stock, bet on a fair resolution and expect to see 100% gains if the company is on track to returning funds to shareholders.

Investors lost over 99% of their capital when stock prices were in the $11′s. With 1,089 total workers, close to 90% of the work staff will be fired. Apple has remained quiet in this whole ordeal, only expressing some surprise about the situation. Out of the $578 million, $440 million was already paid and there is $139 million left to be paid to GT Advanced Technologies (NASDAQ: GTAT).

But this contract didn’t require Apple to purchase any sapphire screens from the company, only that Apple agreed to provide financing for the factory and equipments. Speculation that Apple may use GT Advanced Technologies (NASDAQ: GTAT)’s sapphire screens pushed the price into the $20′s at its peak, but after Apple announced it won’t be using their sapphire screens, shares didn’t move until the official announcement on Apple delay. Why the delay? No one knows. Some, were still hopeful that Apple might change their mind.

Was Apple wrong in this whole ordeal? Did they play unfairly or have any misconduct?