Wolfspeed’s stock plunged sharply by 69% on Wednesday after reports surfaced that the chip supplier might file for bankruptcy soon. Early trading saw shares drop to just 97 cents, while the S&P 500 index fell 0.4%.
According to The Wall Street Journal, Wolfspeed is preparing a Chapter 11 bankruptcy plan that most of its creditors support. The company has not commented on these reports.
In its May 8 earnings report, Wolfspeed said it is exploring several options, including an in-court restructuring. The firm produces silicon-carbide wafers and chips and currently carries $6.5 billion in debt with $1.3 billion in cash as of March 31.
Wolfspeed has become the most shorted U.S.-listed stock by the percentage of shares sold short, reflecting investor concerns about its financial health. Its shares have fallen 53% so far this year amid these worries.
The company’s heavy debt load stems from investments in new factories in New York and North Carolina. Demand for its chips has slowed, partly due to a downturn in the electric vehicle market. Wolfspeed is also awaiting $750 million in CHIPS Act funding, still under negotiation.
Recent operational challenges include delays at its New York factory, layoffs, and the closure of a Durham facility. The new CEO, Robert Feurle, who took over earlier this month, aims to address the debt issues and diversify the business into areas like AI data centers and solar energy.
Filing for Chapter 11 bankruptcy would allow Wolfspeed to restructure its debts while continuing operations. The company hopes to finalize a bankruptcy plan with creditor support to stabilize its future.
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