Wolfspeed Stock Plummets as Bankruptcy Plan Wipes Out Equity
Court approves Chapter 11 restructuring that will slash debt by 70% but cancel existing common stock, triggering a massive investor sell-off.
Shares of semiconductor manufacturer Wolfspeed (NYSE: WOLF) collapsed by nearly 35% in recent trading after the company announced it had received court approval for its Chapter 11 restructuring plan. The reorganization is set to erase the value of all existing common stock, dealing a catastrophic blow to current shareholders.
The U.S. Bankruptcy Court for the Southern District of Texas , clearing the path for Wolfspeed to emerge from the bankruptcy process it initiated on June 30, 2025. While the plan achieves the company's primary goal of deleveraging its balance sheet, it comes at the direct expense of its equity investors.
The core of the approved plan is a significant debt reduction of approximately 70%, cutting what the company owed from an estimated $6.5 billion down to a more manageable $2 billion. This financial overhaul is expected to slash annual cash interest payments by 60%. However, this relief is financed by the .
Under the terms of the restructuring, senior secured noteholders and convertible debt holders will convert their debt into equity, becoming the majority owners of the reorganized company. Existing stockholders will see their holdings canceled, receiving only a minuscule 3% to 5% of the new equity in the restructured entity. The market's reaction was swift and brutal, with the stock price plummeting -34.86% as investors rushed to exit their positions ahead of the wipeout.
Despite the financial turmoil, Wolfspeed has stated its intention to , ensuring product delivery to customers and payments to vendors. The company anticipates officially emerging from Chapter 11 protection by the end of the third quarter of 2025, aiming to re-establish itself on a stronger financial footing, albeit with a completely reset ownership structure.