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GT Advanced Technologies, which makes sapphire glass components for smartphones, filed for bankruptcy on Monday. Sapphire glass is an ultra-strong material, which Apple uses on both the camera lens and fingerprint scanner on the new iPhone. However, Apple doesn't, contrary to some expectations, use the material for the iPhone's main display.
The move caught the market flat-footed, shares of the company were down 90% after the announcement.
The drop in shares of GT on Monday has taken the company's market cap from roughly $1.5 billion Friday to about $175 million.
At least one analyst Business Insider heard from after the announcement sees one possible reason for the sudden change from GT Advanced: Apple pulled the plug.
Jeffrey Osborne, an analyst with Cowen & Co., wrote that Apple, which lent GT $578 million as part of a supply agreement last November, "had the ability to call the interest free loan back and it appears they have done that."
Last November, GT and Apple entered a multiyear sapphire materials agreement that would include GT manufacturing sapphire materials at an Apple facility in Arizona. That agreement said that GT would reimburse Apple over five years, starting in 2015.
In his note, Osborne wrote that the agreement with Apple, "was made in order to allow GT to purchase components for the manufacture of ASF systems at the Arizona facility leased from an Apple affiliate company."
"Repayment was initially scheduled to begin January 2015 and follow a five-year schedule," Osborne wrote. "In its repayment terms, it is most likely that a substantial amount of additional current portion of prepayment was triggered as a result of covenant terms held between GTAT and Apple in relation to operating and financial metrics that the company likely failed to meet."
Osborne also noted that GT's cash and equivalents fell to $85 million on Monday from $333 million back in June, and while Osborne hasn't yet been able to confirm this, it seems this drawdown most likely resulted from early repayment triggers in the Apple loan.
Monday's news comes about a month after Apple announced its latest iPhone models, which some investors were betting would feature a full sapphire display.
They didn't, and immediately following that announcement shares of GT Advanced sold off. And since that news, GT shares have fallen about 40%.
Here's the chart showing the last three months of trading in shares of GT.
Culled from Business Insider
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