At 08.47 hours on 27 July 1942 the unescorted Stella Lykes (Master S. Charles Wallace) was hit by one torpedo from U-582 while steaming a zigzag course at 15.4 knots about 500 miles south of Fogo, Cape Verde Islands. The torpedo struck on the starboard side between the engine room and the #4 hatch, killed an oiler on watch below, stopped the engine, wrecked the complete starboard side including the lifeboat and started a fire from the mainmast to just forward of the bridge but it went out after three minutes. About 35 minutes later, ten officers, 32 crewmen and nine armed guards (the ship was armed with one 4in, four .50cal and four .30cal guns) abandoned ship in one lifeboat and three rafts after distress signals were sent. At 09.58 hours, a coup de grâce hit on the port side amidships and about two hours later the U-boat surfaced and fired 161 rounds into the vessel but she remained afloat.

The master and the chief engineer were taken prisoner by the Germans and cigarettes, first aid supplies and the course to the nearest land were given to the remaining survivors. Some men from the U-boat boarded the wreck to place seven demolition charges, which caused the ship to sink by the stern at 15.15 hours. The survivors boarded the single lifeboat and made landfall on 8 August at Cacheu, Portuguese Guinea.