Wolfspeed, a semiconductor company specializing in silicon carbide technologies, has recently come under the radar of activist investor Jana, known for its strategic and long-term value approach. Jana has raised concerns regarding Wolfspeed’s supply and execution issues, urging the company to take some drastic actions to improve its performance and regain investor confidence.
Wolfspeed, despite being the leading producer of silicon carbide, has been facing challenges related to supply and execution. The company’s expansion plans have been marred by delays, and its ambitious goals are yet to be realized. The announcement of further expansion in Germany has raised eyebrows among investors, as Wolfspeed is struggling to reach its full capacity in existing facilities. This lack of execution has negatively impacted the company’s stock performance in the market.
Jana has outlined a series of recommendations for Wolfspeed to address its supply and ambition problem. The activist investor is calling for the company to prioritize execution at its manufacturing facilities in Mohawk Valley and Siler City. Wolfspeed needs to focus on earning an acceptable return on capital, setting realistic targets, and developing a clear plan for capital expenditures to avoid dilutive capital raises. By creating a credible forward-looking plan, Wolfspeed can begin to regain market confidence and potentially see a rebound in its stock price.
In addition to addressing its supply and execution issues, Jana has proposed that Wolfspeed’s board should explore strategic alternatives, including a possible sale of the company. However, given the current stock price of around $25 per share (down from $70 in July 2023), a sale at an acceptable premium seems unlikely. The more plausible scenario is for Wolfspeed to focus on fixing its internal problems and seeking investment from strategic partners to shore up its supply chain.
Jana’s previous experience with Freshpet, a company facing similar supply shortages and execution challenges, offers some valuable insights for Wolfspeed. By implementing operational and capital allocation recommendations, Freshpet was able to overcome its issues and see a significant increase in its stock price. Jana’s involvement in Freshpet also led to board representation and ultimately a successful turnaround without the need for a sale of the company.
Wolfspeed must address its supply and execution issues to improve its performance and regain investor confidence. By following Jana’s recommendations, focusing on execution, and exploring strategic alternatives, Wolfspeed can work towards a brighter future. It remains to be seen how the company will respond to Jana’s activist campaign, but with the right strategic moves, Wolfspeed could overcome its challenges and thrive in the semiconductor market.