Wolfspeed (WOLF) shares closed nearly 100% higher on Tuesday, July 1, even though the semiconductor company filed for Chapter 11 bankruptcy protection, which is typically viewed as a sign of distress.
Investors reacted positively to what should have been a negative announcement, likely due to a mix of speculative trading and broad expectations that bankruptcy will help WOLF restructure its debt.
Despite this week’s rally, Wolfspeed stock is trading at a fraction of the price at which it started 2025.
WOLF shares soared on Tuesday primarily because the company’s bankruptcy filing is part of its planned, creditor-backed restructuring that lowers its debt by $4.6 billion and cuts annual interest payments by 60%.
Therefore, investors are seeing it not as a collapse, but a financial reset. With over 97% of senior secured noteholders already on board, Wolfspeed says it plans to exit bankruptcy by the end of the third quarter, armed with a cleaner balance sheet and $1.3 billion in cash to fund operations.
Investors are betting this leaner capital structure will allow the NYSE-listed firm to refocus on its high-growth silicon carbide business and reclaim its competitive edge – potentially leading to a meaningful recovery in Wolfspeed stock over time.
Yes – Wolfspeed shares are far from attractive following a 100% rally on Tuesday.
Despite the restructuring, the semiconductor stock remains a highly speculative bet. Wolfspeed has burned through cash for years, losing an alarming $1.1 billion over the past 12 months with negative operating margins exceeding 60%.
Even after slashing debt, equity holders face massive dilution – receiving between 3% and 5% of the reorganized company only.
Plus, WOLF’s revenue continues to miss expectations, and it lags rivals like STMicroelectronics (STM) in both execution and scale. All in all, a Chapter 11 filing may buy time, but it’s not a comprehensive fix to what’s wrong with WOLF stock.
While there’s a possibility of re-rating in the days ahead, investors should note that heading into today, Wall Street had a consensus “Hold” rating on Wolfspeed stock.
