-$22.11
-$11.98
bear -$22.11
base -$15.59
bull -$11.98
margin of safety $0.00
market price* $23.22
Wolfspeed makes silicon carbide: the raw crystal and wafers (its Materials products) and the power chips cut from them (its Power products), used in electric vehicles, industrial power supplies, renewable energy and, more recently, AI and data-center power systems. Its manufacturing sits in the United States: a 200mm device fab in Mohawk Valley, New York, and crystal-growth plants in Siler City and Durham, North Carolina. The older 150mm Durham device fab was shut down during the year. In the nine months ended June 28, 2026 Power products brought in $324.7 million and Materials $143.6 million; total sales across the twelve months were down 12% from fiscal 2025. Industrial demand, end-of-life buys ahead of the Durham closure and AI/data-center applications helped Power, while automotive demand fell and substrate customers cut orders amid price pressure from new supply, particularly from China. The company spent heavily for five years building the two flagship plants: capital spending ran $570 million in fiscal 2021, $637 million in 2022, $950 million in 2023, $2.27 billion in 2024 and $1.27 billion in 2025. It entered Chapter 11 and emerged on September 29, 2025, when about $6.5 billion of debt was replaced by roughly $2.1 billion of new notes plus new shares. A further refinancing in March 2026 (a $96.9 million share sale at about $18.46 and $379 million of 3.5% convertible notes) retired $475.9 million of the most expensive notes. About 54.2 million shares and pre-funded warrants are outstanding. Because the company adopted fresh-start accounting, its post-emergence statements cover only nine months. The earnings level. The business has not earned cash as a standalone silicon carbide company. The small positive owner earnings of fiscal 2017 and 2019 came from the old Cree, which still had its LED and RF businesses, since sold. Operating cash flow itself has been negative every year since fiscal 2020, before any spending on the plants. In the nine months after emergence, operating cash flow was negative $180.8 million. After stock compensation of $27.1 million and capital spending of $72.9 million (all treated as upkeep, because sales fell), and before a $128.3 million benefit from working-capital changes that we strip out as timing, owner earnings were about negative $409 million, or negative $10.46 a share. Adding back $113.4 million of interest paid, the business consumed about $296 million before paying its lenders: roughly $395 million a year. The company says the main reason is underutilization: the cost of running the new plants far below capacity, which it expects to continue until demand meets capacity. The $42 million of intangible amortization added by fresh-start accounting is a bookkeeping charge and does not reduce cash. We do not treat it as a decaying earnings stream either, because there are no earnings for it to decay. One quarter is encouraging: operating cash use in the June 2026 quarter fell to about $54 million, helped by inventory reductions. We take that into the path of improvement but do not base the level on one quarter. What it owes. Debt principal is $1,782 million: $635.9 million of senior secured notes due June 2030, which now pay 15.875% cash because the step-down conditions were not met in June 2026; $296.4 million of 7%/12% second-lien PIK toggle notes due 2031; $470.7 million of 2.5% second-lien convertibles due 2031 (including $203.6 million held by Renesas); and $379.0 million of 3.5% convertible notes due 2031. Add $2.1 million of finance leases. Against this are $1,088.6 million of cash and short-term investments, of which we hold back $100 million as operating cash, and $200.9 million of refundable federal manufacturing tax credits still to be collected. Net debt is therefore $594.6 million. The senior notes' cash rate far above a normal borrowing cost adds about $217 million in present value, the second-lien notes about $12 million more, and the cheap convertibles reduce it by about $107 million. That puts the effective debt at about $717 million. We count the convertibles as debt: their conversion prices are about $12.23 to $20.14 a share, so conversion is not certain. Cash interest now runs about $147 million a year. Bear case. The plants stay well below capacity through a prolonged automotive slowdown of the kind the company has reported through fiscal 2025 and 2026, which has already cut automotive demand and wafer prices. Chinese substrate supply keeps pressure on Materials. Losses before interest stay near the recent run rate (about $420 million and then $440 million a year). After interest, the $1.29 billion of cash and tax-credit receivables falls to about $136 million within two years and the company has to restructure again. Lenders recover the plants, which we value at half of their $691 million fresh-start book value. The business is worth about negative $480 million against effective debt of about $717 million, leaving about negative $1,197 million, or negative $22.11 a share. Base case. The cost actions already disclosed (the Durham fab closure, a 6% workforce cut due by the first half of fiscal 2027, and capital spending kept low) narrow losses before interest to about $300 million, then $260 million, then $230 million. That is not enough. After interest, liquidity is down to about $59 million by the end of year three, before the 2030 senior notes mature, and the business has to be recapitalized. We credit the full $691 million book value of the plants at that point. The business is worth about negative $127 million against about $717 million of debt, about negative $844 million in all, or negative $15.59 a share. Bull case. Industrial and AI/data-center demand fills Mohawk Valley faster, and losses before interest shrink to about $220 million, $150 million, $90 million and $40 million, reaching break-even in year five. Even then, cash and receivables fall to about $203 million by the time the senior notes mature in June 2030 and to about $56 million a year later, so those notes would have to be refinanced. We give no value to profits beyond break-even, because neither Wolfspeed nor its predecessor has ever shown that a silicon carbide business of this size can earn money. The full plant value is credited in year five. The business is worth about $68 million against about $717 million of debt, about negative $649 million, or negative $11.98 a share. What we credited and what we left out. We credited only cost savings the company has already announced and the improvement in the latest quarter. We did not credit higher utilization, AI/data-center growth, price recovery, new government grants or a return to profit. None of these is contracted or proven. Under the senior note terms, certain extraordinary cash receipts must be offered to noteholders to buy back notes, and the interest rate steps down only if, among other conditions, at least $450 million of CHIPS Act grants is received or the notes fall to 2 times EBITDA or less. The judgement. We have little confidence in any positive earnings level, because there has never been one for this business as it is now built. The worst plausible outcome is a second restructuring before the June 2030 maturity that again leaves shareholders very little. The secured debt, the take-or-pay supply commitments (at least $164 million over four years) and minimum electricity purchase commitments in North Carolina all make that more likely. If we are wrong about the timing of the demand recovery and the business reaches break-even in two years instead of five, the shares are still worth less than nothing on these figures. Even then, they would only be worth something if the business went on to earn roughly $100 million a year or more before interest for about a decade after that, which nothing in the record supports yet. In all three cases the company owes more than the business is worth, by roughly $650 million to $1.2 billion. The business pays no dividend, and a holder waiting for a recovery is waiting while cash runs down. We see no price at which the shares offer a dependable 20% annual return today, so our margin-of-safety price is zero. Since our previous analysis. Our earlier estimate assumed the business would reach sustained profitability by the middle of the next decade and gave value to profits that have not yet appeared; those figures are not comparable. The facts that changed are in the business: the senior notes moved to a 15.875% cash rate in June 2026 because the step-down conditions were not met, and a second year of falling sales and continued underutilization has passed without a path to profit becoming visible.