A new complaint was filed against Wolfspeed, Inc. (WOLF) by shareholder (plaintiff) Gary Zagami on November 15, 2024, in the U.S. District Court for the Northern District of New York. The defendants in the complaint are the company, CFO Neill P. Reynolds, and Gregg A. Lowe, who recently stepped down as the President and CEO of the company and a member of the board.
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The plaintiff alleges that he bought WOLF stock at artificially inflated prices between August 16, 2023 and November 6, 2024 (the “Class Period”). The plaintiff is now seeking compensation for his financial losses. To learn more about the lawsuit, click here.
Wolfspeed claims to be the world’s only pure-play, vertically integrated silicon carbide company.
The filed complaint alleges that during the Class Period, the defendants misled Wolfspeed investors in violation of Sections 10(b) and 20(a) of the Securities Exchange Act.
Plaintiff’s Allegations
According to the complaint, WOLF intentionally misrepresented information presented in its financial statements submitted to the U.S. SEC (Securities and Exchange Commission). In particular, the plaintiff alleges that Lowe and Renoylds failed to exercise proper oversight and control over the financial statements.
The complaint accuses Wolfspeed of providing the public with a deceiving picture about its ability to ramp up production of its 200mm wafer product at its Mohawk Valley facility.
For instance, during the earnings call held on August 16, 2023 for Q4 2023, Lowe stated that the company expected continued production ramp-up at its Mohawk Valley facility “with a steeper increase in revenue beginning in the second half of 2024.” Further, CFO Reynolds echoed these optimistic comments and said that the incremental revenue contribution from the Mohawk Valley facility would be the main driver of future revenue growth for power devices.
These bullish statements continued throughout 2024, and the company kept highlighting the importance of Mohawk Valley in driving revenue growth as well as its ability to hit production and financial targets.
However, subsequent disclosures revealed that Wolfspeed’s executives allegedly overstated their projections related to the Mohawk Valley facility.
Wolfspeed’s Misrepresentations
In contrast to the claims made by Wolfspeed and the other defendants, the company allegedly misrepresented the prospects of boosting production at its Mohawk Valley facility.
The truth became clear on November 6, 2024, when Wolfspeed released its results for the first quarter of Fiscal 2025. The company disappointed investors by announcing a slowdown in its production and unveiling unimpressive guidance for the second quarter. Further, Lowe said that the company was cutting down its costs to boost its “path to profitability” by closing or suspending operations at several facilities.
In fact, during the earnings call, the company disclosed that while revenue contribution from Mohawk Valley increased 20% quarter-over-quarter to $49 million, it was at the lower end of its guidance range due to lower customer demand. Consequently, WOLF stock plunged more than 39% on November 7.
To conclude, the defendants allegedly misled investors about Wolfspeed’s revenue projections, which depended on the ramping of the production at the Mohawk Valley facility. Notably, WOLF stock has plunged over 76% year-to-date, leading to significant losses for shareholders.
