Shares of American chipmaker Wolfspeed (WOLF) are down 12% in pre-market trading at the time of writing, following news that the company is planning to file for U.S. bankruptcy amid a restructuring agreement with its creditors. The deal would slash Wolfspeed’s $6.5 billion debt by almost 70%, while also providing the firm with fresh financing. Moreover, existing shareholders’ equity stake will be nearly wiped out, with their reorganized equity stake expected to be between 3% and 5%. The company announced its intent through a press release on Sunday, June 22.
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As of March 30, 2025, Wolfspeed had $1.3 billion in cash, enough to sustain near-term liquidity and support its customers and vendors, the company added. Wolfspeed aims to continue its normal operations throughout the restructuring period.
Details About Wolfspeed’s Creditor Arrangement
Wolfspeed has reached a prepackaged plan with creditors and Renesas Electronics’ U.S. subsidiary to secure roughly $275 million in fresh financing, with the support of select creditors, and to reduce its existing debt by about $4.6 billion. The reduced debt will also lower the company’s annual total cash interest expense by 60%.
The company hopes to obtain approval for the prepackaged plan and emerge from the bankruptcy by the end of the third quarter of 2025. A prepackaged bankruptcy involves reaching a reorganization plan with the creditors prior to the bankruptcy, followed by a vote from creditors.
Wolfspeed shocked the markets on May 20 when reports about its potential bankruptcy filing began circulating. WOLF stock plunged more than 59% the next day and has lost over 86% so far in 2025. Wolfspeed had recently shifted its focus to manufacturing semiconductors for drivetrains and electric vehicle (EV) charging systems. However, the U.S. administration’s stringent tariff policies and diminishing EV demand, coupled with a mounting debt load, forced the chipmaker to resort to this drastic step.
What Is the Future of Wolfspeed?
On TipRanks, WOLF stock has a Moderate Sell consensus rating based on two Buys, one Hold, and four Sell ratings. Also, the average Wolfspeed price target of $3.83 implies 325.5% upside potential from current levels.
Please note, these ratings were given before the bankruptcy news and could change once analysts revisit their recommendations.
