Wolfspeed shares jump on $1.5 billion Pentagon loan offer
Chipmaker Wolfspeed said Wednesday it won a conditional promise of up to $1.5 billion in 30-year loans from the Defense Department to expand U.S. production of chip materials. The parts go into drones, radars and missile defense, as well as electric cars and solar gear. Shares jumped as much as 27% in after-hours trading.
Wolfspeed, a maker of specialty computer chips, got a lifeline from the Pentagon. The company said Wednesday it received a conditional commitment for up to $1.5 billion in 30-year loans from the Defense Department, which the administration calls the Department of War. Its shares surged 27% in extended trading, Reuters reported. Investing.com put the jump at 20%.
The money would come through the department's Office of Strategic Capital, which funds companies seen as key to national security. The loan aims to expand U.S. production of silicon carbide materials and power devices, Reuters reported.
Silicon carbide chips handle large amounts of power more efficiently than ordinary silicon. They are used in electric vehicles, solar inverters and industrial power systems. The Pentagon wants them for drones, high-performance engines, radars and missile defense, Investing.com reported.
Wolfspeed plans to use the money to upgrade its gallium nitride technology for next-generation communications and electronic warfare systems. It also wants to make its chips more resistant to radiation damage.
The deal is not final. The loan still depends on due diligence, final agreements and government approvals. The money would come in stages, starting with $600 million, with up to $900 million more later, according to a company filing summarized by StockTitan.
The government would also get a piece of the company. Wolfspeed would give the department warrants to buy up to 7.5% of its stock, handed out as the loan money is paid. A warrant is a right to buy shares later at a set price.
The move fits President Trump's push to make more chips in America, Investing.com reported. Wolfspeed runs plants in North Carolina, New York and Arkansas, where it makes these materials from start to finish.
Wolfspeed said the loan is part of its effort to improve its finances and its debt structure.
What we know: Wolfspeed has a conditional offer of up to $1.5 billion and would give the government stock warrants.
What we don't: When, or whether, the loan will be finalized.
Where outlets agree Reuters and Investing.com both report a conditional 30-year loan of up to $1.5 billion and warrants for up to 7.5% of Wolfspeed's stock.
Where they differ Reports differ on the stock move, with Reuters putting the after-hours jump at 27% and Investing.com at 20%.