Wolfspeed (WOLF), the semiconductor company specializing in wide-bandgap materials and devices, has shifted its incorporation from North Carolina to Delaware to give itself more flexibility and more favorable treatment from the stringent Chapter 11 bankruptcy regulations. For this, Wolfspeed carried out a reverse stock split, along with submitting the applications for the required regulatory approval of related indentures.
Essentially, the company issued new stock to pay off its debtors, with its existing shareholders getting a maximum of 5% of the new shares. This has led to the bulk of the 329.4% year-to-date (YTD) upmove in WOLF stock and should be seen in that context.
But after years of shareholder wealth destruction, can WOLF stock finally make a comeback? Let’s find out.
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Remarkably, since the company’s listing in 1993, when it was known as Cree, Wolfspeed has never reported any profits. Meanwhile, over the last 10 years, the company’s revenues have clocked a negative CAGR of 7.39%. So, Wolfspeed’s performance has certainly been nothing to “wolf” about.
This continued in the most recent quarter as well, as the company’s losses came in wider than the consensus estimates.
Revenues were down 1.8% from the previous year to $197 million, as net losses swelled markedly in the same period to $669.3 million from $174.9 million. On a per-share basis, however, the losses narrowed to $0.77 from $0.89. Yet, it came in wider than the consensus estimate of a loss of $0.70 per share.
For the fiscal year ended June 29, cash used in operating activities was $711.7 million, almost similar to the prior year’s $725.6 million. Overall, the company closed the fiscal year with a cash balance of $955.4 million. Not only was this significantly lower than the prior year’s figure of $2.2 billion, but it was also much lower than the company’s short-term debt levels of $6.5 billion. This makes the company’s Chapter 11 bankruptcy claims less surprising.
Wolfspeed, despite its severe issues like financial…
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