Key Points
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Despite big sell-offs in today’s trading, Wolfspeed stock has still more than doubled across the last week of trading.
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The explosive valuation gains corresponded with the company naming its next CFO, but the stock has been seeing big pullbacks over the last couple of days.
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Wolfspeed’s incredible volatility makes it impossible to rule out additional rallies, but the stock looks extremely risky right now.
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Wolfspeed (NYSE: WOLF) stock is continuing to lose ground Thursday after a big sell-off in yesterday’s trading. The company’s share price was down 19.4% as of 2:15 p.m. ET today and had been down as much as 22.8% earlier in the session.
Wolfspeed has seen incredible volatility this week. The stock kicked off the stretch with massive gains after the company announced on Monday that it had selected Gregor van Issum as its next chief financial officer. The news spurred an incredible surge for the stock, and the rally continued through Tuesday’s trading — but shares have subsequently seen some big pullbacks.
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Today’s sell-offs aren’t connected to any new developments for the company and instead appear to be a continued profit-taking reaction to the huge gains recorded across Monday’s and Tuesday’s sessions. Even with some big pullbacks, the stock has still more than doubled over the last week.
Should investors pounce on Wolfspeed stock?
The massive rally for Wolfspeed stock early this week appears to have been largely disconnected from the practical implications of what the company naming its next CFO means for current holders of its common stock. The silicon-carbide specialist filed for preliminary Chapter 11 bankruptcy protections at the end of June, and the company is moving forward with a restructuring that will see its assets transferred to creditors in order to offset debt.
The restructuring will also see a new corporate entity created and grant holders of Wolfspeed stock only a small valuation slice of the new company. Depending on how things play out, current shareholders will receive between 3% and 5% of the new business. This provision suggests that there is vey little chance for current shareholders to receive value above Wolfspeed’s current share price after the restructuring is completed.
While it’s within the realm of possibility that the stock could see a short-term surge above its current pricing level, there’s also a big risk that the stock will quickly plummet when shares are de-listed form the New York Stock Exchange (NYSE) due to the company’s bankruptcy proceedings.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wolfspeed. The Motley Fool has a disclosure policy.
