Wolfspeed's 300mm SiC Breakthrough Overshadowed by Bankruptcy and Financial Distress

What happened

Wolfspeed announced a technological milestone with the successful production of a 300mm silicon carbide wafer, aiming to pioneer industry transition to larger wafer sizes. This comes as the company operates under Chapter 11 bankruptcy, with management disclosing substantial doubt about its ability to continue as a going concern. Despite the breakthrough, Wolfspeed's fundamentals remain deeply negative, including an FY2025 operating loss of approximately $1.3 billion and sustained negative free cash flow. The 200mm yield ramp at Mohawk Valley is still underutilized and complex, weighing on margins amid intensifying competitive pressures. Investors should critically assess this news against the backdrop of high execution risk, liquidity concerns, and ongoing restructuring uncertainties.

Implication

This breakthrough highlights Wolfspeed's potential in silicon carbide technology, but it fails to address the core issues of Chapter 11 proceedings and operational underperformance. Investors must recognize that equity recovery hinges on successful restructuring, which remains uncertain with plan confirmation and terms still pending. Liquidity risks persist despite reported cash and anticipated tax credits, as delays or shortfalls could exacerbate financial strain. Operational progress, such as yield improvements at Mohawk Valley, is more critical than forward-looking tech milestones for near-term valuation. Therefore, the news does not justify a shift from the SELL thesis, emphasizing the need for cautious monitoring of bankruptcy outcomes and execution metrics.

Thesis delta

No significant shift in the investment thesis; the 300mm achievement is a long-term technological positive but does not mitigate current bankruptcy, liquidity, or operational risks. The SELL stance remains warranted until Chapter 11 confirmation and tangible yield improvements are demonstrated, as outlined in the DeepValue report's watch items.