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Why Wolfspeed Stock Imploded on Friday

Source The Motley Fool

Friday is looking like a lousy day to own stock in Wolfspeed (NYSE: WOLF) -- and nobody seems to know why.

Thursday evening, the maker of silicon carbide semiconductor chips for power transfer announced it has chosen chip industry veteran Robert Feurle, who previously worked at companies such as Micron Technology, Infineon Technologies, and most recently ams OSRAM, to become its new CEO, replacing interim Executive Chairman Thomas Werner (who will continue in his role as chairman of the board).

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The company had no other news of note -- yet as of 10:30 a.m. ET, Wolfspeed stock is down a dramatic 49.5%.

What's tripping up Wolfspeed?

Can Feurle really be so unpopular that simply giving him the CEO's job is enough to cut Wolfspeed's stock price in half? It seems unlikely. Also, as already noted, Wolfspeed isn't suddenly tossing Werner overboard for some just-discovered malfeasance. He's actually remaining in the company's top job. And the transition in leadership isn't even happening in a rush; it doesn't take effect until May 1.

All things considered, this actually seems like a well-planned transition, four months after the company's last official CEO, Gregg Lowe, was ousted from his post. And Feurle even said all the right things as he accepted the new job: "With all of the company's competitive advantages I feel very confident that we will be able to work through this transformative period to refresh the operating plan, improve financial performance and accelerate our path to positive free cash flow."

Is Wolfspeed stock a sell?

All this being said, one must point out that Feurle's new job won't be a cakewalk. He's taking over a company worth less than $850 million in market cap, but with $6.6 billion in debt. A company that lost more than its own market cap last year, that's burning through $1.3 billion a year, and that only has $1.4 billion cash in the bank.

Maybe, just maybe, what investors aren't upset about today isn't its choice of new CEO. Maybe they're upset with Wolfspeed stock itself.

Should you invest $1,000 in Wolfspeed right now?

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Rich Smith 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.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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