US-based chipmaker Wolfspeed Inc. (WOLF) shares surged on Monday afternoon after it announced a reorganisation plan. Under the plan, shareholders will receive new common stock in exchange for their existing shares.
The stock surged as much as 1,450 per cent following its Chapter 11 restructuring and corporate changes, which were approved by a US court in early September.
The chipmaker filed for in July to enact a creditor-backed plan to slash $4.6 billion in debt, marking one of the largest bankruptcies filed so far this year.
How will the restructuring benefit the company?
court-approved plan will allow the company to exit bankruptcy protection in the upcoming weeks. The restructuring is expected to significantly reduce its debt by 70 per cent, from $6.5 billion to $2 billion, and cut interest payments by approximately 60 per cent.
The company makes chips used in applications such as , solar inverters, and industrial power systems. According to the financial media firm Benzinga, Wolfspeed will also change its state of incorporation from North Carolina to Delaware in the United States as part of the process.
What’s in store for shareholders?
Due to these changes incorporated by the company, the New York Stock Exchange suspended trading of Wolfspeed’s old common stock on Monday, September 29. The company’s old common stock will be delisted on October 10 of this year.
The existing shareholders will receive the new common stock in the reorganised company. However, the restructuring involves significant dilution, which will lead to the current shareholders receiving only 3-5% of the new equity, as creditors are set to take themajority of the company’s ownership.
This massive surge in stock price can be attributed to speculative trading fueled by the massive debt reduction. This surge amid several trading halts on Monday morning, Benzinga reported.
Wolfspeed’s share price
Wolfspeed (WOLF) shares were trading at $14.97 on Monday, up by approximately 1,137 per cent from its previous closing price of $1.17 on Friday, September 26.
The company’s stock appreciated by around 54 per cent in the last year, according to data from the New York Stock Exchange.