Wolfspeed shares soared more than tenfold on Monday, jumping from Friday’s close of $1.21 to $20.89 at closing on Monday.
As part of its emergence from its bankruptcy plan, all of the previously issued and outstanding shares of Wolfspeed’s common stock were cancelled. Shareholders are expected to receive a pro rata share of approximately 1.3 million shares of Wolfspeed’s common stock at an exchange ratio of 0.008352.
Shareholders could receive additional pro rata shares of Wolfspeed stock if certain regulatory milestones are achieved.
The company’s ticker symbol remains WOLF. As of Monday, Wolfspeed had a new float of roughly 25.84 million. This compares to a previous 156.48 million shares for the old listing, according to Barron’s. Old shares will be delisted around Oct. 10, according to an SEC filing.
The SEC paused Wolfspeed trading for several hours on Monday due to volatility, before resuming trading within the last hour of the market being open. Shares were up almost 11% more in the two hours of after-market trading, with Wolfspeed trading at more than $24 a share.
The Durham-based chipmaker plans to convert to a Delaware-registered company. It is now based in North Carolina.
On Sunday, the Motley Fool news service published a story with the headline: Could Buying Wolfspeed Today Set You Up for Life? A possible answer: $1,000 worth of Wolfspeed shares at Friday’s close would have been worth $18,000 at Monday’s high.
The Motley Fool report noted that some speculative investors believe that “the worst-case scenario” is already priced in for the bankrupt company. The story notes Wolfspeed’s strategy of replacing ordinary silicon with silicon carbide might be a winning formula since the “carbon-toughened version of the simple material can be used for higher voltage applications like solar inverters and electric vehicles, since it tolerates higher levels of heat. It’s also just more power-efficient.”
More than 95% of the value of Wolfspeed stock was expected to be eliminated through the bankruptcy process, along with significant reductions in debt held by company creditors. But some investors in the company’s shares obviously believe the emerging company has good prospects.
It is building a $5 billion manufacturing plant near Siler City, aided by federal subsidies approved during the Biden administration. The goal was to promote U.S. chip manufacturing, but the Trump administration has criticized many such projects originating during Biden’s term.
Wolfspeed was formerly called Cree, which was founded in 1987 by some NC State graduate students. It was long known for its light-emitting diode (LED) technology. Former CEO Gregg Lowe, a longtime Texas Instruments executive, joined the business in 2017, and he led a restructuring that split off the chip and lighting businesses.
Lowe was fired in November as the company struggled. At the time, shares were trading for around $6.70. Wolfspeed shares bottomed at 39 cents after the company announced it would file for bankruptcy in July.