Wolfspeed's EV Optimism Overshadows Chapter 11 and Operational Perils

What happened

A Seeking Alpha article paints an optimistic picture of Wolfspeed, emphasizing its 200mm silicon carbide ramp, Toyota partnership, and $1.5 billion liquidity including a $698.6 million tax refund to scale production for the EV boom. In stark contrast, the latest DeepValue report reveals the company is operating under Chapter 11 bankruptcy with disclosed substantial doubt about its going concern, making equity recovery highly uncertain. Wolfspeed's fundamentals remain deeply negative, with FY2025 operating losses around $1.3 billion, sustained negative free cash flow, and underutilization and yield challenges at its Mohawk Valley fab weighing on margins. While liquidity and projected FY2026 revenue of $800.44 million offer a glimmer of hope, competitive pressures in SiC markets and the complex restructuring process pose severe execution risks. Ultimately, the equity's fate hinges on successful plan confirmation and tangible operational gains, which are far from guaranteed given the current headwinds.

Implication

The Seeking Alpha article's bullish narrative on liquidity and growth prospects dangerously overlooks the fundamental vulnerabilities highlighted in the DeepValue report, such as Chapter 11 proceedings and going concern doubts. Wolfspeed's equity is essentially speculative, with significant risk of impairment or wipeout during restructuring, compounded by persistent negative cash flow and margin pressures from underutilized fabs. Liquidity from tax refunds may provide temporary respite, but it fails to address core issues like intensifying competition, yield ramp complexities, and the need for sustained operational improvements. Until the company confirms its reorganization plan and demonstrates consistent yield gains and cost reductions, any investment remains a gamble on uncertain execution. Therefore, prudent investors should avoid exposure, focusing instead on monitoring key catalysts like plan confirmation and yield metrics before reconsidering the stock.

Thesis delta

The new article does not shift the SELL thesis; it merely reiterates liquidity and growth points already accounted for in the DeepValue analysis, which critically assesses the propaganda in filings. The core risks—Chapter 11 uncertainty, negative fundamentals, and execution challenges—remain paramount, reinforcing the view that equity holders face substantial downside with limited near-term upside. Any potential upgrade would require concrete evidence of successful restructuring and operational traction, which are absent in this news.