Wolfspeed Stock Price (WOLF) Soars Pre-Market on Chapter 11 Bankruptcy News

Wolfspeed has officially entered Chapter 11 bankruptcy protection. This isn't a death knell, but rather a calculated maneuver to restructure its massive debt load and recalibrate its strategy amid a rapidly evolving and increasingly competitive market.

The company’s announcement on June 30th, 2025, confirmed the voluntary filing, a move designed to implement a pre-arranged restructuring support agreement already backed by a significant majority of its key lenders, including senior secured noteholders, Renesas Electronics Corporation's U.S. subsidiary, and convertible debtholders.

The aim is ambitious: slash overall debt by approximately 70%, a staggering $4.6 billion, and reduce annual cash interest payments by around 60%. Wolfspeed expects to emerge from Chapter 11 by the end of the third quarter of 2025.

The immediate market reaction was initially euphoric, with Wolfspeed’s stock price up 86% on the news through this morning's pre-market. This knee-jerk response reflected investor optimism that the restructuring would provide the company with a much-needed financial lifeline. WOLF has lost 93.98% since the start of the year leading into the news, and remain firmly below where it began the year ($663).

Wolfspeed's predicament stems from a confluence of factors. The company aggressively expanded its manufacturing capacity, investing heavily in new fabrication facilities to capitalize on the anticipated surge in demand for SiC semiconductors, particularly in the electric vehicle (EV) sector.

However, the adoption of EVs has been slower than initially projected, and the market has become increasingly competitive, especially with the rise of lower-cost alternatives from Chinese manufacturers. These challenges have strained Wolfspeed's financial resources and profitability, leading to the current restructuring.

The restructuring plan has significant implications for all stakeholders. Under the proposed agreement, existing shareholders are expected to see their equity stake diluted to a mere 3% to 5% of the reorganized company. The lion's share of the equity will be allocated to creditors, including Renesas, in exchange for debt forgiveness. This dilution reflects the significant debt-to-equity conversion that is central to the restructuring strategy.

While painful for existing shareholders, this move is deemed necessary to create a sustainable capital structure for the company's future.

Crucially, Wolfspeed is emphasizing operational continuity throughout the Chapter 11 process. The company insists it will continue to deliver SiC materials and devices to its customers and pay its vendors in the ordinary course of business. This is critical for maintaining customer confidence and ensuring that Wolfspeed can continue to generate revenue and execute its long-term growth strategy. The company has also filed motions with the court to ensure employee compensation and benefits programs remain intact, minimizing disruption to its workforce.

The long-term success of Wolfspeed’s restructuring hinges on several key factors. The company must successfully navigate the Chapter 11 process and emerge by the end of Q3 2025 as planned. Any delays or complications could further erode investor confidence and jeopardize the restructuring.

They also need to effectively execute its strategic plan to improve profitability and generate positive free cash flow. This will require streamlining operations, reducing costs, and focusing on high-growth market segments. Finally, the company must successfully compete in the increasingly competitive SiC semiconductor market. This will require innovation, differentiation, and the ability to offer competitive pricing.