Wolfspeed Stock Soars After Filing for Chapter 11 Bankruptcy

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On July 1, Wolfspeed shares doubled following the company’s announcement on June 30 that it had filed for Chapter 11 bankruptcy protection.

The Durham, N.C.-based silicone-carbide chip maker has been struggling with massive debt because of a slowdown in demand from industrial and electric vehicle markets, Reuters reported.

The company said the decision to file for bankruptcy is part of a debt restructuring plan, that involves working with key lenders.

Investopedia reported that in March, departing interim executive chair, Tom Warner warned that Wolfspeed might miss out on the expected $750 million in grants and $1 billion in tax credits from the 2022 CHIPS and Science Act. Shares then plummeted in May following a report that the company was considering filing for bankruptcy.

Wolfspeed shared at that time concerns that economic uncertainty also exacerbated the company’s financial woes because of the Trump administration’s changing trade policies.

Wolfspeed said it had $1.3 billion in cash as of the third quarter and expects to emerge from Chapter 11 by the end of the quarter, having reduced its overall debt by $4.6 billion (about 70%) and will also have reduced its annual total cash interest payments by about 60%.

In a statement, the company shared that it is “continuing to operate as usual throughout the process, including delivering silicon carbide materials and devices to its customers and paying its vendors in the ordinary course.”

Wolfspeed called the move the “next step to implement its previously announced Restructuring Support Agreement ("RSA,") with key lenders,” and CEO Robert Feurle noted that by strengthening its finances, “Wolfspeed will be better positioned to move faster on our strategic priorities and maintain our position as a global leader in the silicon carbide market.”

However, Investopedia noted that despite its July 1 jump in stocks, Wolfspeed has lost 90% of its value this year.