John Gay, the face of one-time Tasmanian timber giant Gunns, could spend time in jail after pleading guilty to insider trading.

The former chairman dropped a bombshell on the morning his trial was set to begin by changing his plea to an amended charge in the Tasmanian Supreme Court.

Gay, 70, had pleaded not guilty to two counts after selling 3.4 million Gunns shares in December 2009.

He was accused by the Australian Securities and Investment Commission (ASIC) of dumping the shares, worth around $3 million, after information in a company report forecast a profit drop of more than 100 per cent.

On Monday those charges were rolled into one amended indictment, to which Gay unexpectedly pleaded guilty.

His lawyer, Neil Clelland SC, said the plea was made, not on the basis his client knew information he possessed was price sensitive, but on the basis that he ought to have known.

The court had been readying for a trial of up to five weeks.

The information Gay used was contained in an October 2009 management report which was not disclosed to the market.

When Gunns subsequently announced a 98 per cent deterioration in half yearly earnings in February 2010, its price plummeted from 88c to 68.5c.

In preliminary proceedings, witnesses told the court Gay was selling the shares in order to get his affairs in order after he was diagnosed with prostate cancer.

He held onto another eight million shares, the court was told.

The timber company collapsed into administration in September last year owing around $3 billion. Gay, regarded by some as the simple sawmiller made good, is credited with building Gunns into an empire.

But that was before it struck trouble when woodchip prices collapsed and a partner could not be found to fund its proposed $2.3 billion Tamar Valley pulp mill.

He resigned as chairman in 2010 as the company looked to build a "social licence" by getting out of native forest logging.

When charged in November 2011, he was considered the most senior Australian executive to have been accused of insider trading. The crime currently carries a maximum penalty of 10 years in jail or a $765,000 fine.

Gay left the Launceston court on Monday without comment.

ASIC is also yet to comment.

He will be back for sentencing submissions on August 14.