Stock and bond market partisans of sapphire screen maker GT Advanced Technologies Inc saw their loyalty turn costly on Monday.
After opening at US$11.06, the stock plunged to US$0.8 by the close, wiping out about US$1.4 billion of market value after GT Advanced shocked investors with a Chapter 11 filing, the process for announcing bankruptcy in the US.
“I can’t recall one like this before,” Lawrence Creatura, a fund manager at Pittsburgh-based Federated Investors Inc, said in an interview. “Ordinarily, bankruptcies are a ‘slow death by a thousand cuts’ type of affair. This one is unusual in its suddenness.”
While Apple Inc agreed in November last year to prepay about US$578 million to GT Advanced to build furnaces that make synthetic sapphire, the company’s newest smartphones did not include the material.
GT Advanced listed assets of US$1.5 billion and liabilities of US$1.3 billion as of June 28, according to a Chapter 11 filing in a US Bankruptcy Court in Manchester, New Hampshire. The company plans to continue operations during its reorganization.
GT Advanced, based in Merrimack, New Hampshire, was losing favor with analysts before its bankruptcy filing, though not enough to suggest the company was headed for Chapter 11 protection.
Jeffrey Osborne, an analyst at Cowen & Co, suspended coverage of GT Advanced. He had rated the stock “outperform,” the equivalent of buy, since August, when he began coverage with a price target of US$19.
“We have gotten this call wrong,” Osborne wrote in a note to clients yesterday. “We did not appreciate that the company appears to have bitten off more than it can chew in regards to the relationship with Apple.”
In Taiwan, the US sapphire supplier’s financial woes also prompted investors to sell shares of GT Advanced’s counterparts yesterday.
Crystalwise Technology Inc (兆遠電子) shares lost 2.35 percent to close at NT$27, while those of Acme Electronics Corp (越峰電子) shed 3.8 percent to end at NT$38.
The over-the-counter GRETAI Securities Market, where the two stocks are traded, fell 1.13 percent yesterday.
In the smaller Emerging Stock Market, Tera Xtal Technology Corp (鑫晶鑽科技) shares fell even more than 12 percent at one point and Crystal Applied Technology Inc (晶美應用材料) shares dropped more than 8 percent at one stage in the wake of GT Advanced’s court filing.
Analysts said investors had become cautious about the global sapphire business and preferred to lower their holdings in local sapphire stocks until the US firm’s financial situation shows signs of improvement.
The market is also watching closely whether smart-watch vendors will use sapphire in their devices, adding that sapphire suppliers need to improve their yield rates to secure orders, analysts said.
Additional reporting by CNA
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