Wolfspeed's shares fell by 50% on Friday, reaching their lowest level since 1998, as uncertainty surrounds funding from the U.S. CHIPS Act, a legislation that promised substantial subsidies for domestic semiconductor manufacturing.
The company is awaiting federal funding under the 2022 bipartisan law that allocated $52.7 billion for semiconductor production in the United States. However, earlier this month, President Trump raised concerns about the law and suggested reallocating those funds to pay down debt.
Brooks Idlet, a senior analyst at CFRA Research, noted that Wolfspeed's grant under the CHIPS Act was the highest not formally awarded before Biden's departure, making it particularly vulnerable under the new administration. Idlet emphasized that without this grant, Wolfspeed would face dire consequences, likely requiring significant restructuring to maintain cash flow.
Wolfspeed aims to enhance the production of silicon carbide chips, which are vital for electric vehicles and renewable energy sectors, with the anticipated federal funding. The company stated that it is maintaining constructive communication with both the White House and the U.S. Commerce Department to secure this financial support.
As of the latest trading session, Wolfspeed's shares were priced at $2.72, marking a decline of over 59% in value this year. The company also announced the appointment of Robert Feurle as its new CEO, effective May 1, following the departure of Gregg Lowe in November.
Additionally, Wolfspeed reported having accrued $865 million in tax credits, which it plans to use to strengthen its capital structure. Estimates from Ortex indicate that approximately 32.5% of Wolfspeed's free float is currently in short positions, reflecting market expectations of further declines in the stock price.