GT Advanced Technologies CEO Tom Gutierrez has already been dealing with the headaches that go along with his company filing for bankruptcy protection, and now those headaches may be growing following the news that he sold more than 9,000 shares of company stock the day before Apple announced the iPhone 6. Apple didn't use GTAT's sapphire glass for the new iPhone models as had been expected, which drove the glass maker's stock down 13 percent.
GTAT's CEO has headaches beyond bankruptcy
Mr. Gutierrez sold the shares for US$160,000, and has sold about 700,000 shares since February totaling $10 million, according to the Wall Street Journal. Executives selling shares isn't suspicious in and of itself, but the timing of these sales is raising some eyebrows.
GTAT's stock was sitting over $17 ahead of the iPhone 6 introduction, but dropped under $15 the day Apple showed off its new smartphone models. Analysts and investors had assumed the new iPhones would sport sapphire glass displays, when instead Apple used a different glass, and that pushed down GTAT's stock.
Apple partnered with GTAT to manufacture synthetic sapphire glass, financed the furnaces the company needed to make the glass, and even leased the factory used for the production to GTAT. As the iPhone 6 launch drew closer, Mr. Gutierrez knew the new phones wouldn't ship with his glass. That might have been a decision Apple made during the design process, or it's possible Apple never intended to use sapphire on its new iPhones, but it still has people questioning if he sold the stock knowing the value would drop after the news went public.
Regardless of why the iPhone 6 and iPhone 6 Plus use Ion-x glass instead of sapphire, the market reaction was the same, and GTAT's stock value dropped. The company said the 9,000 shares Mr. Gutierrez sold the day before the iPhone 6 announcement had been prearranged on March 14, which was months ahead of Apple's September 9 media event.
GTAT apparently wasn't bringing in money as quickly as expected and instead was plowing through the $440 million Apple had advanced for sapphire glass production. When the company's cash reserves dropped low enough, Apple was in a position to call in those loans and reportedly held back a final $139 million payment.
Without the cash flow GTAT and a dipping stock value, the company was in financial bind despite the news that Apple would be using sapphire glass for the displays on two of its three Apple Watch models set to ship next year. The company ultimately filed for Chapter 11 bankruptcy protection on Monday, which now puts it at risk of losing the furnaces and factory Apple financed.
The furnaces were collateral for the the millions Apple fronted, and the company leased the factory to GTAT. All of that is now fair game for Apple.
So this is what Mr. Gutierrez is facing now: GTAT filed for bankruptcy protection, the company's stock has dropped below a dollar a share, Apple didn't come through with a $139 million loan payment, the furnaces and factories GTAT uses for sapphire production could go back to Apple, and now his stock sales are being questioned. That all adds up to one seriously bad week for a CEO with a company that looked to be a rising star in Apple's world only days ago.
Apple may be hard pressed to get enough sapphire for its smartwatch displays now that GTAT looks to be in a death spiral, which opens up new opportunities for the company to find other partners to either provide sapphire directly, or take over GTAT's operations. The question now: Will any companies want to take on the risk and potentially face the same fate as GTAT? Apple may not be directly responsible for GTAT's current situation, but that may not be a gamble other companies are willing to make.