Wolfspeed Emerges from Bankruptcy with Restructured Equity, Shareholders Face Dilution

Wolfspeed shares surged 11.1% Wednesday afternoon as the chipmaker completed its Chapter 11 restructuring. The company executed a debt-for-equity swap that canceled existing shares and issued new stock, leaving prior equity holders with just 5% of the reorganized entity.

Creditors received the majority stake through the restructuring, along with warrants convertible to additional shares. SEC filings had explicitly warned investors of potential significant losses, highlighting the risks of investing in distressed companies.

The financial restructuring illustrates the critical importance of understanding capital structure hierarchy, particularly for companies undergoing bankruptcy proceedings. Market participants should note the continuing dilution risk as creditors exercise warrants to recover their positions.