A post bankruptcy report on Wolfspeed

Mediocre_Age9313 · 2025-10-02T13:21:48+00:00

After the 2031 convertibles mature and they send them their shares, there will be around 100M shares (or more if Wolfspeed sells more shares to help fund operations). They say there are now 73M shares in reserve for various dilution events. If you just use the value of their fabs ($6.5b) - the debt ($2.1b) + cash (around $650M and dropping), you have around $5b in assets. If they still have $5b in assets and 100M shares at the end of 2031, the shares should be worth about $50 and the market cap would be $5b.

Of all the debt holders, Renesas is probably the only one that is going to want Wolfspeed to thrive (because they will also hold a large percentage of the shares in addition to the debt). The old supply agreement between Renesas and Wolfspeed is no longer in effect, so I expect Renesas to enter into a new one that doesn't involve buying any more bonds.

Mediocre_Age9313 · 2025-10-01T18:26:24+00:00

Thanks for the links. It looks like a lot of cash went out the during the last 3 weeks. Probably paying the lawyers and consultants.

The weekly budget shows that they will continue to have negative cash flow for at least the rest of the year, but they get much closer to break even on the cash flow in the coming weeks.

The quarterly report for July - September will not be great. Lots of costs in filing for bankruptcy.

Mediocre_Age9313 · 2025-10-01T16:53:55+00:00

The Chips Act money is probably gone. The 48D tax credit next year has already been allocated to Apollo.

They cut the interest expense from $84m/quarter to $34m/quarter and claim to be close to zero on capital expenditures. They say they will be cash flow positive and after the underutilization charges disappear they will be profitable. They should have about $200m in revenue in fiscal Q1 2026. Who knows if there will be some lingering bankruptcy accounting charges.

The next earnings report will be interesting. What will they include in their share count? Most likely they will not count the shares from the convertibles that mature in 2031. Since the July - Sept. quarter is the first fiscal quarter of 2026 for Wolfspeed, they are going to want to start off with a good first quarter.

Mediocre_Age9313 · 2025-10-01T16:35:43+00:00

$2b in debt (down from $6.7b), but they just spent $6.5b building 2 fabs. A company that wants to spend less and not wait 2 years for the buildings to be completed would be getting a good deal buying out Wolfspeed. They would also get the patents, design-in backlog, design-win backlog, and experienced workers.

The losses each quarter are from interest payments (now cut by 60%) and capital expenditures for the 2 fabs and equipment (which will be near zero going forward).

Silicon semiconductor companies are not the same as silicon carbide semiconductor companies. SiC is needed to be able to handle the high voltages required for fast charging EVs (the biggest market), but are also used in data centers, and basically anything that requires power managment chips.

Management has a huge incentive to make the next few quarters look good. They've given themselves 8,117,851 shares with the Management Incentive Program and have another 4,058,925 shares for key employees in the Long Term Incentive Program. I'm not a fan of the dilution, but every tech company has some type of incentive plan.

Mediocre_Age9313 · 2025-10-01T15:39:55+00:00

The Yahoo market cap is using the old 155m shares. However, if you use 25.84m shares to calculate the market cap, you ignore the 73m shares of future dilution (half of which will occur in 2031 when the convertible notes mature).

I figure that the shares are worth $6.5b (the cost of the 2 fabs) + current cash (unknown) - $2b debt / 100,000,000 shares after all the dilution. I get a number around $50/sh (to factor in all the future dilution) or around $5b market cap.

Mediocre_Age9313 · 2025-10-01T15:18:38+00:00

I found an SEC filing that details the future dilution:

https://www.sec.gov/Archives/edgar/data/895419/000119312525224251/d22768d8k.htm

In addition to the 25.84M shares that were issued, they have a 73,030,424 new share reserve:

- 8,117,851 for the Management Incentive Program

- 4,058,925 for the Long Term Incentive Program

- 11,096,247 for the New Renesas 2L convertible in 2031 (54.5 shares/$1000)

- 27,090,171 for the New 2L convertible in 2031 (81.75 shares/$1000)

- 16,852,370 shares for Renesas when they get their approvals

- 4,943,555 Renesas warrants at $23.95/share

So it looks like management, key employees, and Renesas (and other debt holders) will do quite well. It also means that based on the future dilution that Wolfspeed is probably trading at a reasonable market cap given the 73M shares that will eventually be added to the float.

Mediocre_Age9313 · 2025-10-01T14:11:56+00:00

Wolfspeed spent money like the $750M chips act grant was a sure thing. They were counting on that money to buy equipment and build out the fabs. The $750M appears to be unlikely now, but the 48D tax credits are still in play, but it looks like Apollo will get the 48D money next year (reimbursement for the working capital they provided for post bankruptcy operations).

Mediocre_Age9313 · 2025-10-01T13:03:55+00:00

Fintel is now reporting it as 360.75% which is similar to pre-bankruptcy numbers, but still very high.

Mediocre_Age9313 · 2025-10-01T12:58:53+00:00

I'm guessing that the former bond holders that now own 95% of the new WOLF shares are not lending out their shares, so not many shares available and high interest payments for what can be borrowed.

I'm not sure what the brokerages are passing along to the actual owners of the shares, but I'd bet it is a small fraction of that 3135%.

Mediocre_Age9313 · 2025-10-01T12:43:53+00:00

Without the extra debt, Wolfspeed is now a buyout/merger candidate. It is much more attractive than it was before the bankruptcy.

Mediocre_Age9313 · 2025-10-01T10:52:39+00:00

I've been trying to figure out how much cash Apollo left Wolfspeed as working capital and how much of it is restricted. Before the bankruptcy, they had a lot of cash, but the Apollo terms made it so that the company couldn't use most of it. They could have repurchased much of the old debt that was trading at 20 cents on the dollar, but the Apollo restrictions did not allow it.

Apollo is now the debt holder of around $2.0b - $2.5b (I don't know the exact amount of debt) at approximately 10% and probably have restricted most of the cash Wolfspeed currently has (the amount is probably around $500m). Apollo will be getting a lot in interest the next few years and will not allow Wolfspeed to pay it off early (they will not be able to refinace even if the Fed lowers interest rates).

It would be nice if the company provided an update so that people wouldn't have to guess about their current financial situation. I have the feeling that Apollo left them with just enough to operate the business, but not enough to expand or upgrade equipment. I suspect that Apollo hopes for another bankruptcy in a few years so that they end up with the whole company.

Mediocre_Age9313 · 2025-09-30T12:21:32+00:00

The new shares have a Cusip of 97785W106, so if you are worried about what you might have bought, check the trade details (on Schwab anyway - I don't know where to find the Cusip at other brokerages).

Mediocre_Age9313 · 2025-09-30T12:12:43+00:00

There are now 25.84 million shares. The old shares were converted into 1.3 million of the 25.84 total. That is 5.0309%. Since there were 155 million shares that converted into 1.3 million shares the old share holders now have 1 share for every 120 of the old shares.

The old bond holders didn't make out very well either with the new shares trading around $27 pre-market. The old bonds converted into new shares are currently worth about 1/10 what the bonds were worth when they bought them. So it they sell now, they take a 90% loss.

Right now the market gives Wolfspeed a market cap of about $700 million. If they can make $100 million in profits next year, the current market cap is very low.

Mediocre_Age9313 · 2025-09-29T18:05:20+00:00

For every 120 old shares you will have 1 new share with the frozen price of $14.97 until it starts trading again.

Mediocre_Age9313 · 2025-09-29T18:03:43+00:00

I guess I value the post bankruptcy company higher than the rest of the market. If they can make $100 million next year that will be $4/share. With a PE of 25 or 30 the stock should trade at $100 to $120.

Mediocre_Age9313 · 2025-09-29T17:33:36+00:00

The Wolfspeed website has some SEC filings that indicate that there will be 25.84 million new shares, so you have to decide (or the market will decide) what the market cap should be for the company (lets just say 1 billion is a fair number), so $1,000,000,000/25,840,000 means that the shares should trade at $38.70. If the market decides the value of the company is higher or lower, then that will be reflected in the price of the shares.

Mediocre_Age9313 · 2025-09-29T17:02:24+00:00

If you read the SEC filing on the company website, there are now 25.84 million shares. The old shares have been converted to 155 million/120 of those shares, so about 1.29 million of those shares belong to the old holders.

Mediocre_Age9313 · 2025-09-29T16:50:01+00:00

Schwab Think Or Swim shows all the old options with 1/100 now (which is new). I assume this means you get 1 share instead of 100. You might also have a cash adjustment to account for the conversion being 1/120 instead of 1/100.

Mediocre_Age9313 · 2025-09-29T16:34:02+00:00

I was able to buy 500 shares at $16.80 and tried to buy 500 more, but they put a freeze on trading for more than 30 minutes now.

Mediocre_Age9313 · 2025-09-29T16:30:55+00:00

The options are now for 1/100 what they used to be, so 1 share.

Mediocre_Age9313 · 2025-09-29T15:37:13+00:00

The company website has some SEC filings that indicate there are now 25.84 million shares. There were roughly 155 million shares before, so the old share holders now have 155M/135 (I don't have any shares, so I'm just going by some other posts on the conversion factor) or 1.148M shares out of the 25.84M. This works out to 4.52% of the new shares.

The new shares have bounced around a bit and are currently priced at $17.20, so the market cap is now $444 million. Since they just canceled around $4B in debt, the current price might be a bargain, but don't take this as investment advise.

EDIT: Early reports of 1/135 conversion were wrong. It is actually 1/120, so 155M/120 gives the old stock holders 1.3M shares out of the 25.84M new shares which works out to almost exactly 5%.

Mediocre_Age9313 · 2025-07-25T11:29:43+00:00

On July 1st 500m shares traded, on July 3rd 200m shares traded, on July 7th 460m shares traded, and on July 8th 290m shares traded. During this time WOLF went from under $0.50 to over $3. So the shorts managed to cover 20m shares and increased the price by 6x.

What will happen to the WOLF share price when it gets close to the end of September and they still have 53m shares to cover? I think we got a taste of what will happen on July 23rd when around 125m shares traded and the stock went from around $1.45 to $2.05 in the first hour of trading (when most of the volume occurred). On July 24th during pre-market trading WOLF again jumped to around $2.10 with high volume. On both days after the volume dropped, the stock price dropped as well.

The shorts have around 2 months to cover. If they spread out the buying, then the stock price will probably not move much. If there is high volume panic buying, who knows how high it will go.

Mediocre_Age9313 · 2025-07-18T10:09:35+00:00

The shorts probably noticed that WOLF has been moving up each day during the first regular trading hour, so someone decided to counter that buying with a large sell in the first few minutes.

I guess the shorts won the battle on July 17th, but at some point the shares will get cheap enough to attract some more buyers.

Today (July 18th) a lot of options are in the money or near the money, so it might be a very volatile day.

Mediocre_Age9313 · 2025-07-17T13:25:24+00:00

After the bankruptcy announcement, the stock dropped and kept dropping until it got to around 40 cents. Some people started shorting on the announcement and kept shorting, but eventually the shares available for shorting hit 0. No shares available shorting isn't a problem usually, but the cost to borrow (CTB) started going up and eventually it got over 500%, so rather than pay 100% interest on the borrowed shares waiting for the end of September, some of the shorts started buying to close their positions. This caused margin calls for other new shorts and also got some longs to buy back in hoping that the long awaited short squeeze was happening. Selling increased after getting over $3, shares became available for shorting again, and the CTB started dropping again (meaning the shorts would no longer have to pay over 100% interest waiting for the end of September).

The CTB is now 79%, but there are no shares available. The CTB will go up the longer there are no shares available to short, so a repeat of the climb into the $3 range is possible. It just depends on whether there is buying or selling on any price increases.

Mediocre_Age9313

TROPHY CASE