Wolfspeed shares fall 26% on going-concern warning as chipmaker negotiates debt

Shares of Durham-based chipmaker Wolfspeed plunged in after-hours trading Thursday and slid again Friday after the company told investors that it is considering a variety of options — including possible bankruptcy restructuring — to manage its debt amid uncertainty over $1.75 billion in planned federal funding.

Shares of Wolfspeed closed at $3.28 Friday after regular trading on the New York Stock Exchange — down 26% from Thursday’s close. The company released third-quarter financials Thursday evening, reporting a $285.5 million net loss from continuing operations for the quarter ended March 30 while it ramped up restructuring costs. The company's stock has fallen 87% in the past year.

Wolfspeed has been undergoing a challenging strategic shift, winding down older manufacturing units in Durham while building up more efficient and more profitable facilities in Siler City and Mohawk Valley, New York. All of this comes amid slack demand for some types of the silicon carbide chips it produces.

The company had expected to receive about $1.75 billion in federal grants and tax credits under the Biden-era CHIPS and Science Act to help fund the transition. But executives said in March that the funding agreement could change under President Donald Trump, who has expressed opposition to the 2022 semiconductor legislation. Meanwhile, the company faces a $575 million debt payment due in less than a year.

Tom Werner, the company’s executive chairman, told investors during an earnings call Thursday that Wolfspeed is having “constructive dialogue” with the Trump administration over the federal funding. He added that the company is well positioned to help the administration achieve its goals of boosting domestic manufacturing.

Nevertheless, the company on Thursday issued expanded cautionary notes for investors in a regulatory filing, including a warning of “substantial doubt about the company’s ability to continue as a going concern” — required disclosure language for companies weighing bankruptcy protection.

The company said in a statement Friday that it is focused on “ensuring that we continue operating in the ordinary course, including serving our customers with leading silicon carbide materials and devices and paying our vendors in the normal course.”

“Importantly, we believe we have sufficient near-term liquidity to support the business,” the company said.

Wolfspeed is taking steps to strengthen its balance sheet and raise capital to support its long-term growth plan. It is also negotiating with lenders to manage its debt, executives said.

“As part of our lender negotiations, we may elect to pursue either in-court or out-of-court options,” Neill Reynolds, Wolfspeed’s finance chief, told investors during the call.

In the meantime, executives said they hired outside consultants to help Wolfspeed slash costs, adding that the company plans to cut its leadership team by 30%. Executives also said the company would continue to aggressively pursue customers in growing markets, such as data centers, energy storage, electric vehicles and more.

The company closed the quarter with about $1.3 billion in cash, executives noted, adding that the company expects to receive about $600 million in cash tax refunds during the next fiscal year.

“Our current operating forecast allows us to continue to meet customer, supplier, and employee obligations,” Reynolds said. “We do not anticipate the outcome of our debt negotiations to have a material impact on these stakeholders.”

Thursday’s earnings call was the company’s first under its new chief executive, Robert Feurle, who took over on May 1 from Werner, who had been acting in a temporary role as the company’s top executive. Feurle said he has spent his first days meeting with customers, employees and other executives, reviewing results and strategic initiatives.

“In coming weeks, I'll collaborate closely with our leadership team and board to refine our operating plan with a clear emphasis on re-accelerating revenue growth and enhancing profitability,” Feurle said.