Due to A Snag in the Convertible Refinance Deal, Wolf Speed’s Stock Drop
To refinance its $575 million convertible notes that are due next year, Wolfspeed Inc. is having trouble negotiating a deal with investors. To refinance its $575 million convertible notes that are due next year, Wolfspeed Inc. is having trouble negotiating a deal with investors.
According to sources who know the situation and requested not to be named to reveal private discussions, the chipmaker in Durham, North Carolina, has been collaborating with JPMorgan Chase & Co. on the refinance attempt.
The stock of Wolfspeed has dropped around 49% to $2.72 at 1:25 PM New York time. A conversion to equity is improbable, given the current trading price of the company’s shares, until it hits $47.32. As of Friday afternoon in New York, Channel data showed that the notes were quoted at about 60 cents on the dollar.
According to a statement released by the firm on Friday, “Wolfspeed is still in communication with lenders, including Apollo Global Management Inc. and Renesas Electronics Corp., and is still exploring alternatives about its convertible notes, in partnership with its advisers.” Beyond the statement, a Wolfspeed spokesman declined to comment. A JPMorgan official chose not to comment.
Wolfspeed, which hasn’t reported an annual profit in the past 10 years, received a boost last year when it inked a tentative agreement with the US Commerce Department for up to $750 million in funding via the US Chips and Science Act.
The money was meant to partially offset the company’s then-planned investment of nearly $6 billion in New York and North Carolina plants. It also encouraged Apollo to spearhead Wolfspeed’s $750 million funding.
Production snags at one of the most significant silicon carbide wafer manufacturing facilities, which supply the chips that Wolfspeed uses, are the root of the company’s issues. The corporation had to rely on an older, more expensive facility because of the limited availability of those wafers, which hindered production at its chip plant in Mohawk Valley, New York.
As a “horrible, horrible thing,” US President Donald Trump has urged legislators to repeal the 2022 Chips Act since the agreement was finalized. As part of its attempts to get federal support, Wolfspeed “maintains a constructive dialogue with the White House,” the business stated in a statement released on Friday.
Another blow to Germany’s efforts to strengthen its local supply chain came in October when Wolfspeed canceled plans to construct a nationwide $3 billion semiconductor facility. In collaboration with German car supplier ZF Friedrichshafen AG, Wolfspeed initially intended to begin producing semiconductors for use in electric vehicles at the Saarland facility by 2027.
