Shares of U.S. semiconductor manufacturer Wolfspeed plummeted 30% on Monday following the announcement that the company is preparing to file for bankruptcy as part of its restructuring plan, supported by major creditors.
Wolfspeed has reached a restructuring agreement with top creditors to reduce debt by about 70%, equivalent to $4.6 billion in the bankruptcy filing, while preparing new liquidity funding.
Market reaction to Wolfspeed's restructuring plan
According to the Wall Street Journal, the U.S. manufacturer of silicon carbide wafers and semiconductor components has reached an agreement with the majority of convertible bondholders and senior debt holders, and plans to propose terms to creditors.
Immediately after the news, the chip supplier's stock fell 12% in pre-market trading. Year-to-date, the stock price has plummeted by over 86%, suffering a sharp drop of 59% when bankruptcy rumors surfaced in early May.
Recently, Wolfspeed has focused on manufacturing semiconductors for electric vehicle (EV) drive systems and charging systems but has faced difficulties due to rigid U.S. tariffs and slowing EV demand, putting heavy pressure on the balance sheet. The unsustainable debt burden has forced the company to take this route.
"After considering options to enhance capital structure and optimize the balance sheet, we decided to take this strategic step to position Wolfspeed in the best position for the future."
CEO Robert Feurle.
The restructuring process will help the company clean up its balance sheet and create new growth momentum; however, current shareholders will face nearly complete dilution of their shares.
Wolfspeed targets new funding sources
Information from the company reveals that the restructuring plan will unlock a new funding of $275 million. The announcement on June 22 also plans to cut annual expenses by 60%, retaining reorganization shares in the range of 3% to 5% for existing shareholders.
As of March 31, Wolfspeed still maintains $1.3 billion in cash, sufficient to operate the business and support customers during the restructuring process.
The company is expected to complete its bankruptcy and restructuring, returning to normal operations by the end of Q3 this year, through a vote to approve the pre-prepared restructuring plan under Chapter 11. According to Guru Focus, “prepackaged” plans often accelerate the court approval process due to prior term negotiations.
Wolfspeed aims to maintain continuous operations while protecting customer interests and ensuring timely payments to suppliers. Current shareholders will receive a small amount of new common stock, according to Tipranks. At the same time, the company has laid off 73 employees at the Siler City facility.
In light of the bankruptcy news, Wolfspeed's stock is rated as neutral with 2 buy recommendations, 4 sell recommendations, and 1 hold recommendation on Tipranks.
Source: https://tintucbitcoin.com/wolfspeed-giam-manh-truoc-khung-hoang-tien-dien-tu/
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