Wolfspeed Stock Surges Despite Bankruptcy Filing and Volatility

Wolfspeed's stock surged 12.3% last week despite big sell-offs, following the announcement of new CFO Gregor van Issum. The valuation boost was a big overreaction, and the company's bankruptcy proceedings and potential delisting from the NYSE make investing in the stock risky.

Wolfspeed Inc. (NYSE: WOLF) experienced significant stock volatility last week, with its shares surging 12.3% despite a notable sell-off. The stock's performance was largely driven by the announcement of Gregor van Issum as the company's new Chief Financial Officer (CFO) [1].

Van Issum, who brings over two decades of experience in the semiconductor industry, will succeed Kevin Speirits, who has been serving as Interim CFO. The appointment follows Wolfspeed's recent filing for Chapter 11 bankruptcy protection as part of a prepackaged restructuring plan aimed at reducing its debt by approximately 70% [1]. The restructuring agreement, supported by over 97% of its senior secured note holders and 67% of its convertible note holders, is expected to cut Wolfspeed’s debt by about $4.6 billion and reduce annual cash interest payments by 60% [1].

Despite the positive news surrounding the CFO appointment, Wolfspeed's stock faced significant selling pressure, with shares falling nearly 20% on Wednesday. The company's valuation surge following the CFO announcement may have been a reaction to the larger market dynamics and the uncertainty surrounding the company's restructuring process [2].

Investors should be cautious when considering Wolfspeed's stock due to the company's ongoing bankruptcy proceedings and the potential delisting from the NYSE. According to the rules of the NYSE, companies are typically delisted from trading after filing for bankruptcy. Wolfspeed stock would likely continue trading on the over-the-counter (OTC) markets in the lead-up to its restructuring, but there is a very good chance that its share price will fall substantially upon being delisted from the NYSE [2].

Moreover, Wolfspeed's assets will be transferred to Renesas and other debt holders, resulting in debt being wiped out. However, the deal will mean that shareholders of the old business's common stock will only receive between 3% and 5% of the value of the new company. This makes Wolfspeed an extremely high-risk investment right now [2].

References:
[1] https://in.investing.com/news/company-news/wolfspeed-appoints-gregor-van-issum-as-new-cfo-effective-september-93CH-4902055
[2] https://www.nasdaq.com/articles/wolfspeed-stock-sank-today-buying-opportunity