Wolfspeed Stock Sees 94% Plunge in First Half of 2025 Amidst Bankruptcy Fears

Wolfspeed stock plummeted 94% in the first half of 2025 due to poor quarterly results, a weakening sales outlook, and rising expectations of bankruptcy. The company filed for Chapter 11 bankruptcy protections in June. Despite a 5.5% gain for the S&P 500 index, Wolfspeed's share price saw massive sell-offs, with a $150-$200 million capex cut and CHIPS Act funding uncertainty. The stock has seen a recovery early in the second half of the year.

Wolfspeed Inc. (WOLF) experienced a significant decline in its stock price in the first half of 2025, dropping by 94% despite a 5.5% gain in the S&P 500 index [1]. The company's financial outlook worsened, leading to substantial sell-offs. Key factors contributing to the stock's plunge include poor quarterly results, a weakening sales outlook, and rising expectations of bankruptcy.

The stock's downward trajectory was exacerbated by several major announcements. In March, Wolfspeed announced plans to cut its capital expenditures (capex) by $150 million to $200 million for the next fiscal year and by $30 million to $50 million for the subsequent year [1]. This move suggested a reduction in growth initiatives and raised concerns among investors. Later in the month, reports circulated that the $750 million in CHIPS Act funding, which Wolfspeed had anticipated, would not be distributed due to policy shifts from the Trump administration [1]. This uncertainty further contributed to the stock's decline.

In May, Wolfspeed reported its third-quarter results for the 2025 fiscal year, which ended on March 30. While the loss per share was lower than expected, sales fell short of analysts' estimates [1]. Management's revised guidance for the next fiscal year, predicting sales of approximately $850 million, further dampened investor confidence [1]. This guidance fell far below the average analyst estimate of $959 million, adding to concerns about the company's financial health [1].

Wolfspeed's financial struggles continued into June, when it filed preliminary Chapter 11 bankruptcy protection filings [1]. The company's debt load, estimated at nearly $6.52 billion, and negative financial metrics, including a negative EBITDA margin of 161.3%, EBIT of $200 million, and substantial pre-tax losses, highlighted the severity of its financial situation [2].

Despite these challenges, Wolfspeed's stock saw a recovery early in the second half of the year. The company announced its intention to file for Chapter 11 bankruptcy protections and the appointment of Gregor van Issum as its new chief financial officer [1]. The stock has since risen by 260% in the second half of the year, but there is a significant risk that the stock price could plummet upon delisting from the New York Stock Exchange [1].

Wolfspeed's current financial standing presents a challenging scenario with high risks and limited immediate remedies. The company's restructuring plan aims to cut an estimated $4.6 billion in debt, but the looming shadow of bankruptcy proceedings overshadows these efforts [2]. The stock's significant decline reflects investors' skepticism about the company's ability to navigate its financial quagmire successfully [2].

As Wolfspeed navigates its volatile financial waters, both traders and stakeholders will keenly observe its strategic pivots, eager for signs of turnaround and renewed market confidence [2]. Whether it emerges stronger or succumbs to further turmoil will depend largely on its execution of ongoing restructuring and adjustment strategies.

References:
[1] https://www.fool.com/investing/2025/07/15/why-wolfspeed-stock-plummeted-94-in-the-first-half/
[2] https://stockstotrade.com/news/wolfspeed-inc-wolf-news-2025_07_09-2/