MW Wolfspeed's stock could lose three-quarters of its value as bankruptcy fears build

By Britney Nguyen

The chip company is reportedly preparing to file for bankruptcy as it deals with mounting debt

Shares of Wolfspeed Inc. were down by more than 70% on Wednesday morning after a report indicated that the company is preparing to file for bankruptcy in the next few weeks.

The chip company is looking at a Chapter 11 plan after passing on other debt-restructuring proposals that would have taken place out of court, the Wall Street Journal reported, citing unnamed people familiar with the matter. The bankruptcy plan reportedly is supported by most of the company's creditors.

Wolfspeed (WOLF) makes silicon-carbide technology that is used in automobiles, as well as in other chip components. Even though the company met expectations for its fiscal third quarter earlier this month, investors were worried about the uncertainty over Wolfspeed's need to shore up its finances.

The company said on its earnings call in early May that it was focused on improving its financial situation and had "engaged external experts to continue to identify additional cost-saving measures" in addition to cutting 30% of its senior leadership team, among other efforts.

As of March 31, Wolfspeed said it had $1.3 billion in cash - but the company faces $6.5 billion in debt, according to the Journal report. Bernstein analysts said in March that the company was consuming about $600 million in cash per quarter and that in the competitive market for silicon carbide, they didn't expect its operating cash flow "to improve anytime soon."

Wolfspeed declined a request for comment but pointed to a statement from early May in which the company said it was "evaluating a number of potential alternatives and may implement a transaction through an in-court solution." The company also said it is planning to "submit for approximately $600 million in Section 48D tax credit refunds later this calendar year in our fiscal 2025 tax returns."

Susquehanna analysts noted earlier this month that "fundamentals remain weak for Wolfspeed as 200mm wafers from the JP fail to take off and demand for devices remains depressed." The company operates a manufacturing center in North Carolina known as the JP.

TD Cowen analysts suspended their rating and price target for Wolfspeed's stock earlier this month because of its "increasing likelihood of financial restructuring." Wolfspeed said on its earnings call that it didn't anticipate its debt negotiations to materially impact stakeholders but that it expected to add "going-concern language in the footnotes to the financial statements" of its 10-Q regulatory filing because it was considering pursuing "either in-court or out-of-court options" as part of the negotiations.

The company reportedly said earlier this month that it was considering a restructuring or bankruptcy, as its debt problems posed a potential issue for its government funding.

The company was expected to receive $750 million in federal funding from the U.S. Chips and Science Act, which was designed to bring more of the semiconductor supply chain stateside.

"Wolfspeed is positioned to help achieve some of this administration's important initiatives, leading the American semiconductor revolution, reassuring the manufacturing of critical mineral derivatives, boosting domestic production of technologies critical to national security and securing domestic supply chain," Chair Tom Werner said on the company's earnings call.

-Britney Nguyen

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May 21, 2025 12:06 ET (16:06 GMT)

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