Wolfspeed Inc (WOLF) Risk Analysis

Risks associated with our capital structure Negotiations with our lenders may result in an in-court debt restructuring, and the contemplation of an in-court solution raises substantial doubt about our ability to continue as a going concern. As of March 30, 2025, we had approximately $6.5 billion of debt obligations, as further discussed in Note 9 "Long-term Debt" in our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report. Considering the significant amount of our outstanding indebtedness and related debt service expense, we have engaged external advisors to assist with the evaluation of a number of strategic alternatives, including a potential out-of-court or in-court capital restructuring. These alternatives include, but are not limited to, restructuring, refinancing or amending our existing debt, seeking new financing or pursuing asset sales to bolster liquidity. We have actively engaged in discussions and negotiations with certain holders of our indebtedness regarding the terms of a potential restructuring with a goal of not impacting our customers, vendors and employees in the ordinary course of business. These discussions and negotiations are ongoing and the terms of any potential restructuring have not been agreed upon by the parties. Notwithstanding our efforts, there can be no assurance that we will reach an agreement on acceptable terms and conditions with respect to a restructuring or other transaction in a timely manner or at all. Any restructuring or other transaction will likely be subject to a number of conditions, many of which will be outside of our control, including market and economic conditions and the agreement of the various holders of our indebtedness. Furthermore, any restructuring or other transaction. to which we may agree, may be conditioned on a requirement that the transaction be implemented through an in-court solution. There can be no assurance that we will pursue such a transaction or successfully complete a restructuring or other transaction. In addition, while we can make no assurances on what the terms of a restructuring or other transaction would be or what, if anything, our existing debt and equity holders would receive in any restructuring or other transaction and the value of our debt and equity following the consummation of any restructuring or other transaction, any restructuring or other transaction is expected to be costly, would likely be substantially dilutive to our existing shareholders and would likely limit our ability to utilize our net operating loss carry forwards (and/or other nonrefundable tax attributes). While we consider these strategic alternatives, we retain sufficient liquidity, with approximately $1,329.6 million of unrestricted cash and cash equivalents and short-term investments on our unaudited consolidated balance sheet as of March 30, 2025, compared to scheduled debt repayments and debt service costs of $575 million and $322 million, respectively, over the next 12 months. We also plan to submit for approximately $600 million in cash tax refunds related to the amounts eligible for reimbursement under the AMIC over the next 12 months. We expect that our current operating forecast over the next 12 months will allow us to maintain operations and meet our obligations to customers, vendors and employees in the ordinary course of business. However, due to our ongoing consideration of an in-court restructuring that would result in an event of default during the implementation of that potential solution, management has concluded that there is substantial doubt about our ability to continue as a going concern as of the issuance date of the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q. The reaction of investors to our potential inability to continue as a going concern could have a material adverse effect on the market price of our common stock. This could, among other things, adversely impact our ability to use our equity for strategic, financing or other purposes. Additionally, the perception that we may not be able to continue as a going concern may cause existing or prospective customers, vendors and other counterparties to choose not to conduct business with us due to concerns about our ability to meet our contractual obligations and continue operating our business without interruption. In addition, any in-court solution would subject us to risks and uncertainties that could have a material adverse effect on our business, financial condition, results of operations and liquidity, including, but not limited to, by causing increased difficulty obtaining and maintaining commercial relationships on competitive terms with customers, vendors and other counterparties; increased difficulty retaining and motivating employees, as well as attracting new employees; diversion of management’s time and attention to dealing with the in-court solution and restructuring activities rather than focusing exclusively on business operations; incurrence of substantial costs, fees and other expenses associated with any in-court solution; and loss of ability to obtain sufficient financing sources for operations or to fund any restructuring plan and meet future obligations. We may also become subject to risks and uncertainties caused by the actions of holders of our indebtedness and other third parties who have interests that may be inconsistent with our plans. Furthermore, in any in-court solution, there are risks of delay with the confirmation of the restructuring plan and there are risks of objections from certain stakeholders that could further delay the process and potentially cause an in-court solution to be rejected by the court. Any material delay in the confirmation of an in-court solution would not only add substantial expense and uncertainty to the process, but could materially adversely affect our operations and there is no assurance that any in-court solution will be consummated. In addition, the New York Stock Exchange may take action to delist our common stock in connection with an in-court solution. Any action by the New York Stock Exchange to delist, or the delisting of, our common stock could, among other things, reduce the liquidity of our common stock, detrimentally affect the market price of our common stock, reduce the number of investors willing to hold or acquire our common stock, and impair our ability to incentivize key personnel through equity-based compensation or to use our equity for strategic, financing or other purposes. We have outstanding debt which could materially restrict our business and adversely affect our financial condition, liquidity and results of operations.

Risks associated with our strategic transactions If we fail to evaluate and execute strategic opportunities successfully, our business may suffer. From time to time, including the present, we evaluate strategic opportunities available to us for product, technology or business transactions, such as business acquisitions, investments or capacity expansions, joint ventures, divestitures, or spin-offs. If we choose to enter into such strategic transactions, we face certain risks including:•the inability to realize the expected benefits, both from a timing and amount perspective, from our ongoing and planned capacity expansions, including the construction of a new materials manufacturing facility in Siler City, North Carolina;•the failure of an acquired business, investee or joint venture to meet our performance and financial expectations;•identification of additional liabilities relating to an acquired business;•loss of customers due to perceived conflicts or competition with such customers or due to regulatory actions taken by governmental agencies;•that we are not able to enter into acceptable contractual arrangements in connection with the transaction;•difficulty integrating an acquired business's operations, personnel and financial and operating systems into our current business;•that we are not able to develop and expand customer bases and accurately anticipate demand from end customers, which can result in increased inventory and reduced orders if we experience wide fluctuations in supply and demand;•diversion of management's attention;•difficulty separating the operations, personnel and financial and operating systems of a spin-off or divestiture from our current business;•the possibility we are unable to complete the transaction and expend substantial resources without achieving the desired benefit;•the inability to obtain required regulatory agency approvals;•reliance on a transaction counterparty for transition services for an extended period of time, which may result in additional expenses and delay the integration of the acquired business and realization of the desired benefit of the transaction;•uncertainty of the financial markets or circumstances that cause conditions that are less favorable and/or different than expected; and•expenses incurred to complete a transaction may be significantly higher than anticipated. We may not be able to adequately address these risks or any other problems that arise from our prior or future acquisitions, investments, joint ventures, divestitures or spin-offs. Any failure to successfully evaluate strategic opportunities and address risks or other problems that arise related to any such business transaction could adversely affect our business, results of operations or financial condition.

We are subject to a number of risks associated with our restructuring plan, and these risks could impact our operations, financial condition and ability to realize expected cost savings. In the first quarter of fiscal 2025, we began implementing a restructuring plan to reduce costs, increase our operational efficiency and align our manufacturing capacity with our customers' demand. This plan may result in business disruptions, including impacts to our customer relationships, unfavorable publicity and reputational harm, and loss of productivity from our employees. The expected costs and charges of our restructuring plan may be greater than we have forecasted, and the estimated cost savings may be lower than we have forecasted. We may not be able to implement our restructuring program as planned, and we may need to take additional measures and incur additional costs to fulfill the objectives of our restructuring. If we experience any of these adverse consequences, our restructuring plan may not achieve or sustain the intended benefits and could adversely affect our business, results of operations or financial condition.