Wolfspeed, Inc. — financial distress indicators
Financial-health summary
Wolfspeed, Inc.'s reported numbers place it in the 'Very weak' financial-health band (distress score 70/100). The main indicators are cash runway under 12 months, losses in each of the last 3 years and material debt with no ebitda. Independently, the Ohlson accounting model puts its 1-year failure probability at 86% and the market-implied (Merton) default probability is 11.9%. In its favour: strong current ratio (7.03).
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
At the current free-cash-flow burn, cash covers ~7 months.
Going-concern standard: management must assess ability to continue for 12 months (ASC 205-40). Runway below that horizon forces dilution, asset sales or default.
Net income negative in 3 of 3 fiscal years.
Persistent losses erode equity and the capacity to absorb shocks.
Debt is 58% of assets while EBITDA is not positive.
With no operating earnings, repayment depends entirely on asset sales or fresh capital.
Operating cash flow negative in 3 of the last 3 years.
A business that cannot fund itself from operations depends on external capital to survive.
O-score 1.81 → model probability 86%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Merton distance-to-default 1.18 σ → PD 11.9%.
Investment-grade issuers typically have 1-year PD well below 1%.
Operating margin fell from -41% to -175% in two years.
Sharp margin compression signals loss of pricing power or cost control.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Strong current ratio (7.03).
📰 Recent news scan
- A $1.5 Billion Reason Why Wolfspeed Is in Focus TodayYahoo Finance · 2026-10-08
- Chipotle, Starbucks, Palantir, Intel, SpaceX, Wolfspeed, and More Stocks That Explain Today’s MarketYahoo Finance · 2026-10-08
- Wolfspeed signs $1.5B DOD loan for semiconductor production, R&DYahoo Finance · 2026-10-08
- Wolfspeed shares rise after conditional $1.5 billion government loan agreementYahoo Finance · 2026-10-08
- Wolfspeed gets $1.5B conditional Pentagon loan commitmentYahoo Finance · 2026-10-08
- Wolfspeed Soars 6% on $1.5 Billion Department of War Loan for “Critical National Security Applications”Yahoo Finance · 2026-10-08
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do Wolfspeed, Inc.'s financial-health indicators show?
As of 2026-10-08, Wolfspeed, Inc.'s public financial data places it in the 'Very weak' band with a distress score of 70/100, driven by cash runway under 12 months, losses in each of the last 3 years and material debt with no ebitda. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Wolfspeed, Inc.'s financial distress score?
70/100 ('Very weak'). Ohlson O-score 1.81 (model 1-year failure probability 86%). Merton distance-to-default 1.18 σ (model default probability 11.9%).
What works in Wolfspeed, Inc.'s favour?
Strong current ratio (7.03).
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
Other Semiconductor companies with distress indicators
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- Peraso Inc. (PRSO)Weak 63/100
- POET Technologies Inc. (POET)Weak 50/100
- Pixelworks, Inc. (PXLW)Watch 49/100
Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.