(CN) - A more than 95 percent stock drop and bankruptcy befell a company after its supply deal with Apple never materialized, a federal shareholder class action alleges.
Vance Opperman filed suit in New Hampshire on Tuesday against various officers from the now-bankrupt GT Advanced Technologies Inc., a leading manufacturer of consumer electronics materials.
He says GT went bankrupt last week on Oct. 7 after already obtaining $440 million in prepayments from Apple on a multiyear agreement to supply the tech company with a scratch-resistant material called sapphire crystal.
The Wall Street Journal reported that Apple is withholding the final $139 million installment of the $578 million it committed to pay GT for that deal, according to the complaint.
GT has just $85 million in cash-on-hand, already below the $125 million "trigger point" at which Apple's deal allows it to demand reimbursement of its prepayments, Opperman says.
GT announced its Apple deal on Nov. 4, 2013, and CEO Thomas Gutierrez told shareholders the next day that GT "was in a 'good position' with regard to its capital and financing," the complaint states.
Richard Gaynor, the chief financial officer at GT, allegedly expressed confidence that the company's "projected cash levels are adequate to run the business for the foreseeable future."
Opperman now calls those statements "materially false and misleading."
"In truth, [the] company was facing an impending liquidity crisis and knew that it would not be able to meet the requirements of the Apple agreement without experiencing significant cash-flow problems," according to the complaint. "Further, the ostensible risks that defendants identified in the offering materials for the offerings were false and misleading because those risks had already materialized at the time the statements were made and were negatively impacting the company's business."
Though Apple had used sapphire crystal in the camera lenses of older iPhone models, neither of the two latest iPhone models unveiled on Sept. 9, 2014, "contain displays made from GT's sapphire material," the complaint states.
GT's stock price then dropped over 25 percent - from $17.15 to $12.78 per share - over two trading days, while the price of the debt dropped from $1,613 to $1,279 per note, shareholders say.
When GT announced its bankruptcy, it had about $1.5 billion in assets and $1.3 billion in liabilities as of June 28, according to the complaint.
News of GT's repayment obligations after the bankruptcy announcement sent shares into a tailspin, according to the complaint, which says "the price of GT stock declined from $11.05 per share to $0.80 per share, or almost 93%, on heavy trading volume."
"Similarly, the price of the debt issued pursuant to the debt offering, which had a face value of $1,000 per note, declined from $1,083 per note to $315 per note, or almost 71 percent," the complaint continues.
Opperman hopes to represent GT shareholders from roughly the last year.
In addition to the 11 officers and directors, GT's underwriters, Morgan Stanley, Goldman Sachs and Canaccord Genuity, are named as defendants.
The class seeks damages for violations of the Securities Act of 1933 and the Securities and Exchange Act of 1934. It is represented by Jason Crance of Hanover, N.H., and Lockridge, Grindal, Nauen of Minneapolis.