Wolfspeed Stock Is Tumbling Wednesday: What's Going On?

Wolfspeed Inc WOLF shares are crashing Wednesday following reports that the company is preparing to file for bankruptcy.

What Happened: Wolfspeed could file for Chapter 11 bankruptcy protection within the coming weeks as the chip component maker struggles to find a solution for its mounting debt position, according to a Wall Street Journal report.

Sources familiar with the matter reportedly said Wolfspeed declined multiple debt-holder proposals and is now looking at a bankruptcy filing that is supported by a majority of the company’s creditors.

Wolfspeed reported financial results for its fiscal third quarter at the beginning of May, showing that the company had more than $6.5 billion in debt and approximately $1.33 billion in cash, cash equivalents and short-term investments.

“At the beginning of the year, the Company outlined a plan focused on strengthening our capital structure, improving our path to profitability, and raising cost effective capital to support our growth plan,” chairman Tom Werner said in the earnings release.

“We continue to work closely with our lenders on ways to address our capital structure so that Wolfspeed has a strong financial foundation to support its continued success.”

Wolfspeed stock is heavily shorted with about 68% of the float currently sold short, according to the latest short interest data from Benzinga Pro. Wolfspeed shares are down about 88% over the past year.

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How To Buy WOLF Stock

By now you're likely curious about how to participate in the market for Wolfspeed – be it to purchase shares, or even attempt to bet against the company.

Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy “fractional shares,” which allows you to own portions of stock without buying an entire share.

If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform, or a broker who will allow you to “go short” a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option, or sell a call option at a strike price above where shares are currently trading – either way it allows you to profit off of the share price decline.

WOLF Price Action: Wolfspeed shares were down 63.6% at $1.15 at the time of publication Wednesday, according to Benzinga Pro. Wolfspeed has a 52-week high of $30.86. The stock is currently trading at 52-week lows.

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Photo: T. Schneider/Shutterstock.