Silicon carbide chip manufacturer Wolfspeed has successfully completed its Chapter 11 bankruptcy reorganization under U.S. bankruptcy law, significantly reducing its debt burden. Following this development, the company's stock price surged over 25% in Tuesday's premarket trading.
As automotive electrification accelerates and the content of automotive chips continues to increase, silicon carbide semiconductors have become critical components for electric vehicle manufacturers due to their superior energy efficiency advantages. Emerging from bankruptcy protection has restored investor confidence in Wolfspeed, with many believing the company is positioned to become a leading supplier in the silicon carbide semiconductor sector.
Wolfspeed CEO Robert Feurle stated on Monday: "Wolfspeed has emerged from difficulties through a rapid reorganization process, marking the beginning of a new era for the company."
Feurle added: "End markets including artificial intelligence, electric vehicles, industrial and energy sectors are experiencing rapid growth with increasing recognition of silicon carbide's potential. We are well-prepared to capitalize on the growing demand in these markets."
In June of this year, Wolfspeed filed for bankruptcy protection due to heightened economic uncertainty triggered by changes in U.S. trade policy and weak market demand.
Since filing for bankruptcy, the company has completed its reorganization, advanced debt restructuring efforts, and implemented significant management changes, including appointing industry veteran Van Issum as Chief Financial Officer.
Wolfspeed announced on Monday that it has achieved its goal of reducing total debt by approximately 70%.
However, during this bankruptcy reorganization, Wolfspeed canceled all existing shares and issued only 1.3 million new shares to original investors, with an extremely low conversion ratio - each old share can be exchanged for less than 1% of a new share.
This arrangement has resulted in massive dilution for existing shareholders, as the vast majority of new shares were allocated to creditors and investors who provided guarantees for the reorganization, leaving original shareholders with only minimal equity stakes.
Due to analysts' expectations that Wolfspeed will continue to post losses, the company currently trades at negative valuation multiples. In comparison, according to data compiled by London Stock Exchange Group (LSEG), Onsemi trades at a 12-month forward price-to-earnings ratio of 17.9 times, while NXP Semiconductors trades at 16.7 times.
