Wolfspeed Inc (NYSE: WOLF) has non-savvy investors scratching their heads this morning as its share price soared from $1.21 at market close on Friday to well over $20 at the start of this week.
That translates to a little under 2,000% gain in a single day – which doesn’t quite make sense given a “short squeeze” is reportedly not what’s driving WOLF stock higher.
Much of this so-called rally instead is related to a new share float – raising questions about who actually benefits, and how much, from this seemingly explosive move in Wolfspeed shares.
Did Wolfspeed stock investors just made 17x profit?
Not exactly. While the massive surge in WOLF’s share price suggests over 1,700% rally, the reality of this surge is more nuanced for legacy shareholders.
Technically, what we’re seeing on Wolfspeed’s price chart this week is not a “rally” per se – but a repricing only. As part of the semiconductor firm’s recent emergence from bankruptcy, all of its previously held common shares were voided.
Investors are now entitled to a fractional allocation in the new float – roughly 0.008352 shares of the new stock for each old share held.
That means someone who owned 1,000 shares pre-bankruptcy would receive just over eight shares of the new listing. Additional shares may be distributed if regulatory milestones are met – but for now, the windfall is rather limited.
A company spokesperson called the situation “complicated,” and clarity on actual payouts remains elusive.
Why else have WOLF shares been in spotlight in September?
Wolfspeed stock remained in focus this month primarily because it’s been on major development after another for the manufacturer of wide-bandgap semiconductors.
First, it was the restructuring aimed at lowering the company’s debt by as much as 70%. Following emergence from bankruptcy, WOLF plans on reincorporating in Delaware as well – which is often seen as governance-friendly.
On Monday, the NYS-listed firm also named five new board members, signalling a strategic reset. Meanwhile, the reduced flat, now at 25.84 million shares compared to 156 million previously adds scarcity value as well.
For speculative investors, WOLF shares are means of betting on more efficient and heat-resistant silicon carbide technology that’s ideal for electric vehicles (EVs) and solar applications.
Should you invest in Wolfspeed today?
While Wolfspeed’s stock chart tells a story of explosive gains – the underlying fundamentals are still in flux, with sinking revenue and persistent losses.
The Durham-headquartered company’s pivot from LED roots to high-voltage chip manufacturing sure is bold, but not without risk. Former CEO Gregg Low’s departure last year marked a turning point, and bankruptcy wiped out most shareholder value as well.
More importantly, WOLF stock no longer receives broad coverage from Wall Street firms, which is another major red flag for seasoned investors. Even ones that cover Wolfspeed shares rate it at “underweight” currently.
For now, Wolfspeed share price rally is a potent mix of a new float, restructuring, speculation, and the promise of a second chance – but none of it makes it a sound long-term investment in 2025.
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