TeraWulf Stock has Surged Over 200%, and One Fund Just Sold Off $12 Million in Shares

Hodges Capital Management disclosed a sale of 919,169 TeraWulf (WULF) shares in Q4 2025, an estimated $12.32 million based on quarterly average pricing, leaving a post-trade holding of 2,866,544 shares worth $32.94 million and a quarter-end position decline of $10.30 million after trading and price moves. TeraWulf shares traded at $16.63 as of Feb. 10, up 224% year-over-year; the company reports TTM revenue of $167.6 million, a TTM net loss of $586.64 million and a $6.67 billion market cap, while recent operational highlights include Q3 revenue up 87% to $50.6 million, $7.2 million in initial HPC lease revenue, over $17 billion in long-term HPC contracts signed, ~$712.8 million cash and restricted cash, and roughly $1.5 billion of debt. The disposition appears driven by position-sizing and risk management after a triple-digit rally in a high-beta, capital-intensive crypto-mining business rather than an explicit change in conviction.

Analysis

Market structure: Hodges’ 919k-share trim is a profit-taking signal more than a structural shift — marginal sell flow (~$12m) increases near-term float but won’t change industry capacity. Winners are larger, less-levered infrastructure/tech names (NVDA, TPL) as allocators rebalance away from high-beta crypto exposure; losers are levered miners (WULF, peers) whose cost-of-capital and implied credit spreads rise if BTC softens. Cross-asset: expect higher implied volatility in miner equity options, wider high-yield/convertible spreads for miner debt, and transient correlation with BTC and power/energy equities over 1–12 weeks.

Risk assessment: tail risks include a >50% BTC drawdown, US state/federal restrictions on mining, or a refinancing shock that forces dilution — each could wipe 30–70% of WULF equity value within months. Immediate (days): 5–15% directional moves on headlines; short-term (1–3 months): realized vol and potential secondary issuance; long-term (12–36 months): upside depends on converting $17bn HPC backlog into contracted recurring cash flows and reducing net debt <$1.0bn. Hidden dependencies: counterparty credit on HPC contracts, power contract pricing, and covenant triggers tied to BTC price and miner hash-rate economics.

Trade implications: tactical ideas — (1) establish a speculative 1–2% long WULF only on a pullback to ~$13.30 (20% down) with hard stop -30% and target $25 (50% upside); (2) pair trade long NVDA (1% portfolio) vs short WULF (1%) to play secular AI vs cyclical crypto divergence over 3–12 months; (3) buy 3-month WULF puts strike $12 or purchase a 3x-weekly calendar put spread to hedge existing exposure and monetize elevated IV. Rotate 1–3% from miner exposure into NVDA/TPL and reduce aggregate mining exposure to <=3% of equity risk budget.

Contrarian angles: the market may underprice conversion optionality of HPC contracts — if WULF converts even 20–30% of the $17bn into multi-year leases, valuation could re-rate materially (>2x) over 12–36 months. Conversely, consensus may be underestimating dilution risk; past mining cycles (2017–19) show winners were the best-capitalized operators. Watch for unintended consequences: equity selloffs can force higher yields on secured financings, accelerating dilution and operational cutbacks.

Key Decisions for Investors

• Establish a tactical 1–2% long position in WULF only if price drops to <= $13.30 (20% pullback); set a hard stop at -30% and a profit target to trim at $25 (≈50% gain).
• Implement a relative-value pair: go long NVDA (1% portfolio) and short WULF (1%) to capture secular AI outperformance vs levered crypto beta over a 3–12 month horizon; rebalance monthly for delta exposure.
• Buy 3-month WULF protective puts (strike $12) sized to cover 50–100% of position or, if long WULF, sell 1–2 month $20 covered calls to monetize IV; alternative: buy a 3-month put spread ($12/$8) to limit premium outlay.
• Reduce total crypto-miner exposure to <=3% of equity risk budget and redeploy 1–3% into NVDA and TPL (increase NVDA by 0.5–1%, TPL by 0.5%) to lower portfolio beta and capture infrastructure/AI asymmetry.
• Monitor three catalysts over the next 60–90 days and act on confirmation: (A) public conversion schedules/receipts from HPC contracts (material conversion within 90 days → add exposure), (B) any US regulatory action targeting mining (within 30–60 days → cut exposure by 50%), (C) BTC moving above $60k on 30-day average (→ add call spread exposure to WULF).