Wolfspeed faces dilution risk in $1.5 bn Pentagon loan

Wolfspeed said in an Oct. 7 company announcement that the U.S. Department of Defense offered a conditional 30-year loan of as much as $1.5 billion through its Office of Strategic Capital.

The Oct. 14 TheStreet article said the financing could steady a strategically important chipmaker whose shares had dropped nearly 65%, from a $80.82 52-week high in May to $28.08 at publication.

Robert Feurle, Wolfspeed’s chief executive, said in the company release that “SiC and GaN have critical national security applications.” He said the transaction would support Wolfspeed’s work with the department and its national-security business.

Silicon carbide and gallium nitride are wide-bandgap semiconductors, chips built to handle higher heat and voltage than conventional silicon. TheStreet said Wolfspeed’s chips are used in electric vehicles, radar systems and advanced defense equipment.

TheStreet, citing TnW, reported that the Defense Department said Wolfspeed materials are used in drones, radars, missile defense and electronic-warfare systems. That places the proposed loan in the broader U.S. effort to protect domestic capacity in technologies tied to military supply chains.

Wolfspeed’s securities filing said the loan would be a senior secured delayed-draw facility, a collateral-backed borrowing that can be tapped over time. The first $600 million would refinance first-lien senior secured notes due in 2030 and pay transaction costs, the filing said.

The remaining $900 million would be split across three tranches of $200 million to $400 million, according to the filing. Wolfspeed said those funds would support silicon carbide wafer and power-device capacity, domestic gallium nitride production, GaN-on-SiC radio-frequency wafer technology and radiation-hardening work at sites in North Carolina, New York and Arkansas.

Those later disbursements are not automatic. The Office of Strategic Capital must complete further due diligence, and Wolfspeed must sign acceptable offtake agreements, equitize most of its convertible notes and show compliance with financial covenants, including a loan-to-value test, the filing said.

The shareholder issue is tied to Wolfspeed’s required contribution. The filing said the company must provide at least $750 million from “Qualifying Sources,” a category that includes new common or preferred equity, equity-linked instruments, converted debt, excess cash and other items accepted by the Office of Strategic Capital.

TheStreet reported that the $750 million is not due at the start. It said $50 million must come from a third-party equity raise before the facility becomes effective, another $100 million before the second tranche, and the remaining $600 million as later tranches are drawn.

Reuters reported, according to TheStreet, that Wolfspeed would issue Defense Department warrants for up to 7.5% of fully diluted shares, divided between 5% at one strike price and 2.5% at another. New equity and exercised warrants would dilute existing holders.

Gregor van Issum, Wolfspeed’s chief financial officer, called the commitment “another significant milestone in our ongoing efforts to optimize Wolfspeed’s capital structure.” TheStreet said the company can add interest to the loan balance for the first five years rather than pay it in cash.

The stock reaction showed the difference between strategic support and equity risk. Yahoo Finance data cited by TheStreet showed Wolfspeed shares rose as much as 33% to about $40 on Oct. 7, then closed near $30.96 on Oct.

8, down about 22% in 24 hours.

The next reported step is completion of definitive agreements with the Office of Strategic Capital. Wolfspeed still must meet the initial contribution requirements before the facility becomes effective and satisfy separate conditions before drawing the remaining $900 million.

Source: Financial-news article, TheStreet, Oct. 14, 2026.