Many folks of all political stripes agree that the U.S. needs to expand domestic chip manufacturing production to relieve our reliance on China.
So Wolfspeed’s $5 billion bet on a Chatham County plant, supported by $750 million in government backing pledged by the Biden Administration, makes sense to a lot of people across the political spectrum. Support for the plant in North Carolina is reflected in pledges of more than $700 million in incentives for the project, some to prepare the 445-acre site and others that hinge on hitting hiring targets set by state officials.
But things have gotten interesting for the Durham-based manufacturer, which now has the dubious status as the most shorted U.S. stock as a percentage of shares sold short, according to S&P Global Management.
The company has traded between $2.06 and $30 over the past year, and closed Wednesday at $2.57.
Wolfspeed’s problem is twofold: It has to make a $575 million balloon payment to convertible note holders next year, and the president of the United States doesn’t like many decisions made by his predecessor, including support for the 2022 CHIPS Act that may provide funding for the plant. That law involves billions of public dollars to expand semiconductor production in the U.S.
This week, The Wall Street Journal explained the company’s financial squeeze, noting that Wolfspeed has hired the Latham & Watkins law firm, financial adviser Perella Weinberg Partners and the FTI Consulting turnaround firm to develop options for its bond repayments.
For North Carolina, it’s an extremely important matter given the potential jobs and economic impact, says Karen Howard, chair of the Chatham County Commission.
The plant is “fully built out, people are working there and they are engaging significantly with local schools and the community,” she says. Chatham relies primarily on residential property taxes for its income and hopes Wolfspeed can become a major tax contributor over time, she notes.
There was no immediate response to a request for comment by Wolfspeed, which has said production will start this year and ramp up through 2030. As many as 1,800 people are expected to work at the 2 million-square-foot plant.
Chatham County officials believe the federal funding to support Wolfspeed will come through, based on conversations with state and federal leaders, Howard says. While there is nervousness given President Trump’s critique of the CHIPS Act, “we have not heard that the funding won’t be flowing,” she says. “This is the kind of technology that we want to bring home and have production within our networks.”
The federal transaction with Wolfspeed included a $750 million pledge of additional financing from private investors, including Apollo Management, Baupost Group, Fidelity Management & Research and Capital Group. But the company has to restructure its notes coming due in the next four years, the Journal reported.
Wolfspeed’s 2026 convertible bonds trade for about 60 cents on the dollar, while the company has said it can not pay its debts over the next year, given its current financial status. The company has named a new CEO, trimmed staff and made other changes to ride out its challenging circumstances.
The company could benefit from higher tariffs supported by President Trump, making it more likely that General Motors and others would buy from a U.S. supplier rather than China or Europe, the Journal noted. But the pessimism of investors suggests difficult times ahead for the company, it added.