When Wolfspeed (WOLF) filed for Chapter 11 bankruptcy protection this summer, its shares skyrocketed 530% in the five days after announcing its reorganization.
It was perhaps a case of investors being bullish on the company’s turnaround strategy under new CEO Robert Feurle and the recently hired CFO Grego van Issum, who brings a strong background in orchestrating strategic corporate transformations.
Feurle said at the time that the bankruptcy would allow Wolfspeed to “move faster on our strategic priorities” and keep its edge in the fast-growing silicon carbide market.
The company this week announced that it has emerged from Chapter 11 protection and successfully completed its financial restructuring process.
Wolfspeed said that as part of its reorganization, it has reduced its total debt by about 70%, with its maturities extended to 2030, and also reduced its annual cash interest expense by approximately 60%. It also indicated that it has enough liquidity on hand to support sustainable growth with its manufacturing business.
“Wolfspeed has emerged from its expedited restructuring process, marking the beginning of a new era, which we are entering with new energy and a renewed commitment to the growth mindset and entrepreneurial spirit that have powered Wolfspeed since its inception,” Feurle said in a statement.
He added that the company is confident that it is “well positioned to capture rising demand in end markets, such as AI, EVs, industrial and energy, that are rapidly growing and recognizing silicon carbide’s potential.”
Wolfspeed’s stock surged more than 1600% on Tuesday and then rose nearly 30% in early morning trading on Wednesday, before plunging nearly 16% by midday.
It closed down 13.4% on Wednesday.
Shareholders feel they’ve been ‘diluted to hell’
Although it’s not known for certain why the stock’s performance suddenly reversed course, it’s possible that the reality of what Wolfspeed’s bankruptcy means or shareholders began to set in.
The problem for investors when it comes to a bankruptcy filing is that it renders the investments by common shareholders essentially worthless.
That’s because creditors have the highest priority in getting paid by the company, which means shareholders will only see any money after the creditors are paid in full – and only if there is any money to spare after the bankruptcy proceedings have been completed.
Shareholders and other investors began voicing their displeasure on social media by Wednesday.
One investor noted in a post on X that Wolfspeed’s stock had been soaring because “millions of new shares were issued to satisfy Wolfspeed's creditors.”
“Creditors now own the vast majority of Wolfspeed stock, meaning existing shareholders have been diluted to hell,” the person wrote.
Another shareholder took issue with Wolfspeed posting about the “new era of energy” that says it’s entering following its bankruptcy.
“Are you really posting this on the day where your legacy shareholders get absolutely screwed on the conversion?” he wrote. “We were told we would get 3% to 5%; instead we got .08% through some mathematical gymnastics that your lawyers performed.”
To be sure, Wolfspeed said in its bankruptcy filings that all “previously issued and outstanding shares of Wolfspeed’s common stock were officially cancelled,” which it noted is “a common outcome in bankruptcy proceedings where debt holders often take precedence in the capital structure."
But it nonetheless isn’t sitting well with retail investors.
“How can you sleep at night after stealing your shareholders' wealth?” another investor posted. “I had 1600 shares on Friday morning, I now have 13.”
Robert Castellano, a semiconductor analyst who publishes the Semiconductor Deep Dive Newsletter, wrote that Wolfspeed’s restructuring strategy “was a textbook debt-to-equity conversion, except with almost no equity left for prior shareholders.”
“Retail investors depend on honest language and continuity of ownership; when a company retains its ticker but erases existing holders, it violates that faith,” Castellano said. “Legal jargon such as ‘recapitalization’ or ‘cancellation of equity’ may satisfy disclosure rules, yet it obscures the real-world outcome for ordinary investors.”
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