Wolfspeed (NYSE: WOLF) has spent the past year attempting to persuade investors that its turnaround story carries real weight, with new leadership and a restructured debt deal central to that effort.
Despite those moves, Wall Street short sellers remain unconvinced, with nearly 54% of Wolfspeed’s available shares currently sold short, placing it at the top of heavily shorted U.S. stocks with market values above $2 billion.
That short interest puts Wolfspeed well ahead of SoundHound AI (SOUN) and Intellia Therapeutics (NTLA), two companies more commonly associated with speculative, loss-making business models.
Most heavily shorted stocks tend to cluster in software and biotech, industries characterized by rich valuations, persistent losses, and dependence on future growth rather than present-day profitability.
Wolfspeed stands apart from that crowd because its bear case is rooted less in hype and more in fundamental cash flow arithmetic: how much money is coming in versus how much is going out.
The company manufactures silicon carbide chips and materials used in electric vehicles, industrial equipment, aerospace, and increasingly, artificial intelligence data centers, positioning itself around what it describes as the “most disruptive innovations.”
For the third quarter of fiscal 2026, Wolfspeed reported revenue of $150 million, which CEO Robert Feurle described as in line with guidance, though the figure was roughly flat compared with recent quarters.
Gross margin deteriorated to -27% in the third quarter, a significant widening from the -12% margin recorded in the year-ago period, signaling that the company loses money on every chip it produces before overhead costs are even considered.
CFO Gregor van Issum attributed the margin weakness primarily to factory underutilization, which amounted to roughly $46 million in the quarter, while adjusted EBITDA came in at -$62 million and operating cash flow landed at -$84 million.
Management has guided for fourth-quarter 2026 revenue of between $140 million and $160 million, with gross margin expected to remain in negative territory throughout that period.
Wolfspeed did execute one notable financial maneuver during the quarter, completing a private placement that raised approximately $476 million through new convertible notes, stock, and warrants.
According to van Issum, the transaction reduced the senior secured note balance by roughly 43%, cut total debt principal by about $97 million, and is expected to lower annual interest expense by around $62 million.
Total assets fell sharply to $3.1 billion from approximately $6.85 billion as of June 29, 2025, reflecting the accounting reset that accompanied the company’s bankruptcy restructuring process.
Short sellers argue that shrinking assets, persistent operating losses, and ongoing cash burn make Wolfspeed overvalued relative to the risks it carries, with the refinancing doing little to resolve the core problem of a factory running well below capacity.
Wolfspeed currently holds a consensus “Moderate Sell” rating among the two Wall Street analysts covering the stock, with one recommending a “Hold” and the other a “Strong Sell,” and an average price target of $40 implying potential upside of just 11% from current levels.
