Wolfspeed (WOLF -16.35%) managed to close out the past week of trading with double-digit gains despite big sell-offs in the second half of the stretch. The company’s share price climbed 12.3% from the previous week’s market close.
Wolfspeed’s valuation received a massive boost at the beginning of this week, after the company announced it had named Gregor van Issum as its next chief financial officer. The news kicked off a huge rally that saw the stock more than double across Monday and Tuesday’s trading, but the share price surge lost steam and gave way to a big pullback later in the week.
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Wolfspeed stock saw incredible volatility this week
Wolfspeed published a press release Monday morning announcing that van Issum will take over as the company’s next CFO on Sept. 1. Wolfspeed announced that it had submitted preliminary filings for Chapter 11 bankruptcy protections at the end of June, and its new CFO will play a leading role in guiding these proceedings. Van Issum’s background suggests that he is a good pick to handle the company’s bankruptcy proceedings and big corporate restructuring, but the gains for the stock at the beginning of the week seem to have been a significant overreaction to the news.
Companies that have announced bankruptcy proceedings can sometimes see incredible valuation surges on relatively minor news and then see big stock corrections in subsequent trading. This dynamic appears to have played out for the silicon-carbide specialist in the second half of this week’s trading, but the stock still wound up solidly in the green across the stretch.
What’s next for Wolfspeed stock?
While it’s possible that Wolfspeed could see more big valuation rallies in the near term, investing in the stock right now would be incredibly risky. Because the company is in the bankruptcy process, its stock will probably be delisted from the New York Stock Exchange (NYSE). Shares would then shift to trading through the over-the-counter (OTC) markets, but delisting from the NYSE would likely trigger big sell-offs. Meanwhile, investors who plan on holding on to their current shares of the company’s common stock through the end of the bankruptcy and restructuring process will receive only between 3% and 5% of the value of the new corporate entity that will be created.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wolfspeed. The Motley Fool has a disclosure policy.
