Wolfspeed Shares Plummet 35% in Sudden Sell-Off
The abrupt drop comes weeks after a court approved a restructuring plan that severely diluted shareholder value.
Shares of Wolfspeed (WOLF) plunged nearly 35% in heavy trading on Wednesday, a sudden and dramatic sell-off that came with no apparent fresh news catalyst. The drop, which occurred on more than double the stock's average daily volume, signals deep investor anxiety following the company's recent emergence from bankruptcy protection.
The Durham, North Carolina-based semiconductor company's stock has been exceptionally volatile since it earlier this year. While the company's prepackaged restructuring plan was approved by a U.S. bankruptcy court in early September, the terms of the deal have left common stockholders with a fraction of their original investment.
Under the reorganization, existing shareholders are expected to receive just 3% to 5% of the new equity in the reorganized company, a severe dilution that has reset the stock's valuation. The plan converts a significant portion of debt into equity, making former creditors the new majority owners.
Wednesday's sell-off appears to be a delayed reaction to the new capital structure, possibly exacerbated by algorithmic trading or a large institutional investor unwinding a position. The lack of a specific news trigger suggests the decline is rooted in the post-bankruptcy.
Wolfspeed, a key player in the silicon carbide market, has faced a series of challenges over the past year. These include a slowdown in the electric vehicle market, increased competition, and operational hurdles at its manufacturing facilities. The company reported a , reflecting the intense financial pressure that led to its restructuring.
While the company aims to emerge from this period with a healthier balance sheet—reducing its debt from $6.5 billion to $2 billion—it faces a challenging road ahead. Analysts have adopted a cautious stance, with most holding a "Hold" or "Moderate Sell" rating on the stock. The average 12-month price target for WOLF shares sits between $1.50 and $2.00, according to , indicating that Wall Street expects the stock to remain under pressure.