Wolfspeed Stock (WOLF) Craters Over 59% on Bankruptcy News
Shares of semiconductor player Wolfspeed (WOLF) cratered over 59% on May 21 after the Wall Street Journal reported about its probable bankruptcy. The chipmaker and component supplier is set to file for a pre-packaged Chapter 11 bankruptcy within weeks, the report said, and most creditors are likely to support the proceedings.
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Wolfspeed is struggling with a mounting debt load that far exceeds its cash balance. In March, the company rejected several out-of-court settlement proposals from bond holders after its largest backer rebuffed the offers. Now, bankruptcy appears to be the only option as it has become harder to refinance its soon-to-mature debt securities. Diminishing chip demand from the automotive and industrial markets, coupled with stiff competition from Chinese players and tariff uncertainty has undermined Woldspeed's ambitions.
Here's How Wolfspeed Got into This Mess
Wolfspeed is an all-American semiconductor manufacturer and would have really succeeded under President Donald Trump's 'Make in America' initiative, were it not for its debt problems. In October 2024, Wolfspeed secured a $750 million financing deal with a group of investors led by Apollo Global Management APO +0.10% ▲ . At the time, Wolfspeed was also expected to receive up to $750 million in funding under the CHIPS Act of 2022. However, that taxpayer money was contingent on Wolfspeed refinancing its convertible notes maturing in 2026, 2028, and 2029.
The silicon carbide chipmaker has roughly $6.5 billion in debt, while its cash and cash equivalents balance stood at $1.3 billion as of March 31, 2025. Out of the looming debt, the Apollo-led group holds $1.5 billion in senior secured loans, which forms the top-most tier. The group has the right to approve any new secured financing and was also responsible for rejecting all restructuring offers in March. Those deals included a provision for Wolfspeed's largest lender, Japan's Renesas Electronics, to convert some of its outstanding convertible notes to equity. Notably, Apollo has a 'make-whole' provision in the agreement, which means it remains unscathed from Wolfspeed's bankruptcy proceedings.
Wolfspeed recently warned investors about its ' going concern ' risks and also cut its 2026 revenue outlook to $850 million, significantly below the consensus. The company has tried to streamline costs by cutting 20% of its workforce and shuttering facilities. However, to make matters worse, intense competition has led to a heated price war among chipmakers over the N-type SiC substrates, one of Wolfspeed's specialties.
Will Wolfspeed Stock Recover?
On TipRanks, WOLF stock has a Hold consensus rating based on three Buys, two Holds, and four Sell ratings. Also, the average Wolfspeed price target of $4.13 implies 141.5% upside potential from current levels. Meanwhile, the stock has lost 74.3% so far this year, and chances of a recovery seem very slim at the moment.
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