GT Advanced Technologies Inc: The Technical Aftermath
On Monday, GT Advanced Technologies Inc (NASDAQ: GTAT) revealed a voluntary filing for bankruptcy. It was done so based on the perception that the courts will allow the company to conduct business as usual as it attempts develop a reorganization plan.
The 90-percent drop in this issue appeared to have surprised the Street. On many occasions, an issue will go on a type of “death march” toward zero before a bankruptcy is formally announced.
For example, the price pattern of RadioShack Corporation (NYSE: RSH) more closely resembles a company on the brink of bankruptcy. A long period of deterioration followed by an extended time trading under the all-important $1.00 level.
Even the short players -- those that represented 43 percent of GT Advanced's float -- likely could have imagined a better scenario to unfold.
“It is shocking...things like this do not happen,” said Dennis Dick, proprietary trader and co-host of Benzinga's PreMarket Prep Show. “It has been a long time, this compares to Bear Stearns debacle, but we were in the midst of a financial collapse when that took place.” he added.
This was not the case for GT Advanced.
Although its share price had been halved since making its all-time high in July ($20.54), it had been consolidating and attempting to put a low in above the $10.00 level before the bankruptcy filing.
What Happened Before
On October 2, the company said it was postponing its previously announced business update conference call to the week of October 6.
The company also missed Wall Street estimates for EPS in four of the previous five quarters on fluctuating revenues.
UBS analyst Stephen Chin, in particular, downgraded the issue from Buy to Neutral on July 7, two days removed from its all-time closing high of $19.77. "We believe GT can still hit the midpoint of its sales guidance of $600-$800M but believe our checks of a slower ramp in 2Q14 makes the high end more challenging," Chin said at the time.
GT Advanced also faced a trio of downgrades in September from Goldman Sachs, Dougherty & Company and Piper Jaffray.
Where It's Trading Now
As seen in chart, GT Advanced's share price had been halved in the last three months. The stock's price is down another 82 percent since Monday.
On Tuesday, shares rose just over 50 percent during the session.
Disclosure: At the time of this writing, the author had no position in the equities mentioned in this report.
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