Shareholder Wipeout: Wolfspeed’s Restructuring Plan Obliterates Equity Value

Wolfspeed shares are experiencing a catastrophic decline following the court’s approval of its Chapter 11 reorganization strategy. The company’s emergence from bankruptcy protection comes at a devastating cost to current investors, whose holdings are being massively diluted. Market prices now fully reflect the reality that existing shareholders will be left with a minimal stake in the reorganized entity.

Core Restructuring Terms Crush Equity Holders

The primary driver behind the stock’s collapse is the sanctioned plan that effectively nullifies the value of current common shares. Under the court-approved terms, existing equity holders are slated to receive only 3% to 5% of the new company. This near-total evaporation of shareholder value has triggered violent selling pressure, with the stock posting single-day losses exceeding 30%.

A clear downward trend has taken hold. Weekly technical analysis reveals persistent declines, with the share price establishing successively lower closing levels. Fundamental metrics further illustrate the immense pressure on the business, highlighting negative gross margins and deeply unprofitable operations prior to the restructuring.

Balance Sheet Relief Through Massive Debt Reduction

Approved by the US bankruptcy court on September 8, 2025, the central feature of the plan is a dramatic de-leveraging of the balance sheet. Wolfspeed’s liabilities will be slashed by approximately 70%, from around $6.5 billion down to $2 billion. This financial overhaul will significantly reduce the company’s interest burden.

Should investors sell immediately? Or is it worth buying Wolfspeed?

While this provides Wolfspeed with substantial financial flexibility to pursue its strategic priorities, the newfound stability is achieved directly at the expense of its current investor base.

Operational Headwinds Persist Post-Restructuring

Despite the financial overhaul, significant operational challenges remain. The company continues to grapple with profitability issues, declining revenue, and high operating costs, particularly at its Mohawk Valley fabrication facility. Restated figures for the second quarter of fiscal year 2025 show the Mohawk Valley Fab contributed $52 million in revenue—a figure substantially lower than previous market reports for other quarters had suggested.

Key Takeaways from the Corporate Overhaul:

• Near-Total Equity Dilution: Current shareholder equity is being almost completely wiped out, with a conversion to just 3% to 5% of the new entity.
• Court-Approved Debt Cut: The restructuring plan legally enables a reduction of the debt load by roughly 70%.
• Severe Market Reaction: The stock plummeted as the terms of the reorganization became clear, recently recording losses of over 30% in a single session.
• Pre-Bankruptcy Financial Health: Negative gross margins and a troubled equity position had previously signaled high bankruptcy risk.

The path forward for the reorganized Wolfspeed will navigate a highly competitive silicon carbide market as the company attempts to regain its footing. The immediate focus will be on leveraging its reduced debt load to achieve financial stability and accelerate its journey back to profitability.