By Swetha Gopinath
(Reuters) - GT Advanced Technologies Inc, Apple Inc's partner in a sapphire glass plant in Arizona, filed for bankruptcy on Monday in a stunning turn of events for a company whose fortunes looked bright only a few months ago.
The stock fell more than 90 percent to 75 cents, wiping out nearly all of its $1.5 billion market worth. GT was worth more than $2.8 billion in early July on hopes of its scratch-resistant sapphire glass being a part of the new iPhones.
"It's unbelievable ... I don't think anyone expected this," said Dennis Dick, a proprietary trader at Bright Trading LLC in Las Vegas.
"I can't remember the last time ... well Bear Stearns was probably the last time, but we were in a financial crisis then. This was completely out of the blue."
The stock had more than doubled in the nine months between November's announcement of the new Arizona plant and the launch of Apple's new large-screen iPhones on Sept. 9 as investors hoped GT would replicate Corning Inc's success with Gorilla Glass.
Since then the stock had slumped 36 percent after GT's sapphire glass was left out of the new iPhones. GT had said a month earlier that the Arizona plant would not be fully operational until early 2015.
"It would appear that something very fundamentally broke down in the relationship between Apple and GT Advanced," Raymond James analyst Pavel Molchanov said in an email.
GT said on Aug. 5 it was expecting Apple to pay it $139 million in connection with the plant. Apple had paid it $439 million totally as of that date.
The company had warned then that costs related to the plant had a "significant impact" on its liquidity and results. Still, it forecast revenue of $600-$700 million for the full year, more than double the $299 million it reported in 2013.
According to data from Markit, which tracks short interest, 43 percent of GT's shares outstanding were being loaned out for short bets, a very high level that indicates there were plenty of investors who thought this stock was headed lower.
Apple will use a sapphire screen for two of the three versions of its Apple Watch, which will be available early next year. It also uses the material on the camera cover and touch sensor button on its iPhones.
The deal with Apple placed restrictions on GT selling the sapphire screens for use in certain applications, according to the company's regulatory filings.
GT gave Apple an exclusive license for certain applications of its sapphire glass technology, but the iPad maker had no obligation to buy the glass, according to the filings.
GT, whose subsidiaries also filed for bankruptcy, said it had $85 million of cash as of Sept. 29. The company had cash and cash equivalents of $333.1 million as of June 28.
The company has reported a loss for the last four quarters, but raised the lower end of its full-year adjusted profit forecast in August, citing higher margins.
GT, which also makes equipment for consumer electronics, power electronics, solar and LED products, said in its Chapter 11 petition that it had assets of $1.5 billion and liabilities of $1.3 billion as of June 28.
The company filed for bankruptcy in a U.S. bankruptcy court in the District of New Hampshire and said it was seeking debtor-in-possession financing to get access to additional funds.
GT said it expected the court to authorize it to continue to conduct business as usual while it reorganized.
By 1:30 p.m. ET, more than 115 million shares had changed hands, making it the most actively traded stock on the Nasdaq, despite being halted five times due to excessive volatility.
The case is in re: GT Advanced Technologies Inc, U.S. Bankruptcy Court, District of New Hampshire, No: 14-11916.
(Additional reporting by David Gaffen and Chuck Mikolajczak in New York and Anannya Pramanick in Bangalore; Editing by Sriraj Kalluvila and Savio D'Souza)