The hardest lesson for investors after GT Advanced Technologies (NASDAQ:GTAT) filed for bankruptcy is simply accepting they were duped by management. Without any significant warning on the trading action, shares fell 92.5% following the filing, and closed at $0.83. For current investors, there are still risks holding shares. This is why it is imperative that shares be sold and a loss be recorded on the trading sheets. There is no doubt that lawyers will file a class action suit to recoup anything. Yet
GT said in its press release that it had approximately $85 million in cash. With 137.54 million shares outstanding, that is just $0.618 in cash per share.Legal recourse
Even with whatever legal recourse available,
any cash raised from selling assets will only cover current liabilities and legal fees related to the bankruptcy filing. GT had $132.6 million in inventory, $611.46 million worth of property, plant and equipment, and $196.6 million in other assets as at June 28 2014. Liabilities included $173.1 million in deferred revenue and a prepayment obligation of $306.7 million.
The first lesson investors should draw from this bankruptcy is recognizing that before believing the high target prices, the financial balance sheet should be checked. Assets as a percentage of liabilities fell steadily since June 2013...
GT likely missed key milestones, and was unable to meet the volume requirements for the iPhone 6. Apple had to switch to plan B earlier this summer. That is: using Corning's (NYSE:GLW) gorilla glass and sapphire for the iWatch. Management did not disclose this information, which is material. Instead, CEO Gutierrez sold 9,332 shares at an average price of $17.38, netting $160,448. His sales volume was actually higher at the start of 2014:s.list
Stating the obvious: avoid
The market may very well stir rumors of Apple or Corning buying GT's assets. Both firms will likely allow the bankruptcy process to take place. This will mean that buyers might purchase the assets at the lowest possible value. Investors who were lucky not to hold shares should continue avoiding this company.
seekingalpha.com/article/...ced-technologies-bankruptcy-filing