Wolfspeed to File for Bankruptcy, Stock Dives 70%
According to The Wall Street Journal, Wolfspeed—one of the world's leading silicon carbide (SiC) technology pioneers—is preparing to file for bankruptcy protection within weeks due to escalating debt challenges. Following the report, the company's stock plummeted over 57% in after-hours trading on May 20. Year-to-date, shares have dropped 33%, with a staggering 85% plunge in 2024 alone. At the May 21 market open, Wolfspeed's stock fell 63.58%, and losses deepened to over 70% by mid-day, shrinking its market value to just $149 million.
Wolfspeed has been grappling with weakening demand in industrial and automotive sectors since last year, compounded by ongoing uncertainty tied to U.S. trade policies. In its Q3 FY2025 earnings released on May 9, the company acknowledged operational risks and projected FY2026 revenue to fall to $850 million—well below the market expectation of $959 million.
The primary concern is Wolfspeed's heavy debt burden, currently totaling $6.5 billion, including a $1.5 billion senior secured loan held by Apollo Global Management. After failing to reach a restructuring deal with bondholders, the company's financial position has worsened. Despite assurances during the earnings call that negotiations—whether in-court or out-of-court—would minimize stakeholder impact, the company plans to disclose "going concern" risks in its next 10-Q filing.
Latest developments suggest Wolfspeed has rejected several out-of-court restructuring proposals and is now actively preparing to seek Chapter 11 protection, reportedly with backing from a majority of creditors.
As a key global player in SiC wafer manufacturing, Wolfspeed's product lineup includes SiC power modules, discrete MOSFETs, diodes, and bare die MOSFETs—components critical to electric vehicles, renewable energy systems, industrial power infrastructure, and data centers. The company has more than 30 years of experience in SiC innovation, launching the first commercial SiC wafer in 1991 and the first SiC MOSFET in 2011.
Despite holding a 33.7% global market share in SiC substrates as of 2024, Wolfspeed has faced increasing operational pressure due to sluggish end-market demand and fierce price competition from emerging Chinese SiC manufacturers such as TanKeBlue and SICC.
In November 2024, Wolfspeed cut its workforce by 20% and closed multiple sites. By early 2025, additional facilities were shut down, and operations were consolidated at its 200mm SiC wafer fab to boost efficiency and scale. However, these restructuring efforts have not produced a turnaround in performance.
Adding to the challenges, key customers—including General Motors and Mercedes-Benz—have revised or withdrawn their 2025 forecasts, further impacting Wolfspeed's revenue outlook. Compounded by trade policy uncertainties, including tariffs from the Trump administration, the company's future remains uncertain.
There is also concern over the fate of the $750 million in subsidies Wolfspeed was awarded under the CHIPS and Science Act during the Biden administration. A policy reversal under a potential Trump-led government could put this funding at risk, worsening the company's financial outlook.
During the latest earnings call, CFO Neill Reynolds acknowledged the possibility of court-led debt restructuring and confirmed that associated risks would be disclosed in the financial statements. Reynolds is expected to depart from his role soon. Meanwhile, Executive Chairman Thomas Werner announced a 30% reduction in the senior management team as part of crisis management efforts.
