Wolf speed (NYSE: WOLF) stocks see big sell-off in Tuesday’s trading. The company’s stock price was down 8.8% as of 2:30 PM ET and had fallen as much as 11.2% earlier in day trading.
Wolfspeed shares are losing ground today in conjunction with a new report from Axios detailing recent troubles at the company. The company’s share price is also likely to be under pressure due to news that the silicon carbide specialist is being indicted for securities fraud. Wolfspeed shares are now down 79% this year.
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Axios today published a new report on Wolfspeed’s challenges and investor dissatisfaction. The report details the company’s shift to focus on silicon carbide chips, devices and materials and how the initiative had led to skyrocketing debt. The report also noted that Wolfspeed had repeatedly issued downward revisions to its guidance, and that utilization rates at existing plants and the cancellation of expansions had caused many investors to lose confidence in the company. Gregg Lowe resigned as the company’s CEO last month and the company is reducing its workforce by about 20%.
In addition to Axios highlighting problems at Wolfspeed, law firm Block & Leviton announced it had filed a securities lawsuit against the company and some of its executives. The lawsuit alleges that Wolfspeed and certain executives materially misled investors about the company’s condition and near-term trajectory. Specifically, the lawsuit notes that Wolfspeed has lowered its expectations between 30% and 50% from an initial forecast that suggested 20% utilization of its Mohawk Valley manufacturing plant would generate $100 million in revenue.
Wolfspeed’s silicon carbide technologies are generally highly regarded and could cause a long-term demand setback when combined with the evolution of the electric vehicle (EV) industry. On the other hand, EV market growth is slowing – and many analysts now expect adoption to occur at a slower pace than previously expected.
Wolfspeed posted a net loss of $282.2 million last quarter and ended the period with $1.7 billion in cash and equivalents, versus about $3.1 billion in debt. With production scale and factory utilization lagging behind the company’s original plans, it seems unlikely that the company will become profitable anytime soon. On the other hand, some analysts and investors think the company could be a potential takeover target.
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Keith Noonan has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Wolfspeed. The Motley Fool has a disclosure policy.
Why Wolfspeed Stock Is Plummeting Today was originally published by The Motley Fool
