Wolfspeed price tumbled 60% after hours, is the silicon carbide giant going bankrupt?

TradingKey - Silicon carbide giant Wolfspeed (WOLF) stock price peaked at $142.33 in January 2021, and has been on the downtrend ever since. On May 20, Wolfspeed's stock price fell by about 60% in after-hours trading, halving again to $1.37.

Activist investor JanaPartners exited its entire position in Wolfspeed in the first quarter of this year. The firm believes that Wolfspeed management's mistakes in capital allocation, execution and strategy have led to huge problems in the company's operations and that the stock price will continue to collapse.

[Wolfspeed daily K-line chart, source: tradingview]

The Wall Street Journal reported that the company is preparing to file for bankruptcy in the coming weeks, has accepted several debt restructuring proposals from creditors, and will add "going concern" language to its upcoming quarterly report.

Wolfspeed's bankruptcy was not unpredictable - there was a warning in the financial report as early as 2024. The 2024 financial report showed that Wolfspeed's cumulative net loss was US$864 million, an increase of 162% from fiscal year 2023; the gross profit margin in the fourth quarter fell sharply, from 29% in the same period of 2023 to 1%.

Events that require attention

The competition between Infineon Technologies (IFNNY) and STMicroelectronics (STM) has also had a huge impact on Wolfspeed's market share. We will pay attention to whether the company's dynamic competition can be improved in the future.

The pressure of US tariffs and the global economic slowdown have led to a reduction in orders and a squeeze on profits. Possible positive effect on Wolfspeed from the tariff reprieve is yet to be seen.