Jana Partners, activist investor, urges Wolfspeed Inc., the largest producer of silicon carbide in the world, to consider all options for increasing shareholder value, including a possible sale.
TakeAway Points:
- Activist investor Jana Partners disclosed that it has built a “significant” position in semiconductor manufacturer Wolfspeed and urged the company to resolve what it called a “staggering erosion of shareholder value,” up to and including a sale.
- Jana wrote in a letter to Wolfspeed’s board, viewed by CNBC, that the company’s “differentiated manufacturing capabilities” and status as an “American supplier supporting the energy transition” gave it significant intrinsic value.
- The investor also wrote that management’s missteps around capital allocation, execution, and strategy had depressed the stock.
Letter to Wolfspeed
Activist investor Jana Partners revealed in a letter to Wolfspeed’s board on Monday that it has amassed a “significant” stake in the semiconductor company and urged it to address what it called a “staggering erosion of shareholder value,” up to and including a sale.
According to the letter reviewed by CNBC, management made mistakes with capital allocation, execution, and strategy, which led to the stock’s decline. Wolfspeed also stated in a statement that its board would “carefully review” Jana’s letter.
“The company continually evaluates options to enhance long-term value and is committed to acting in the best interests of all our shareholders,” it said.
Wolfspeed shares still Down Amid 9% Increase
Following the initial report of Jana’s holdings, Wolfspeed’s shares saw an almost 9% increase. Even yet, the company’s stock has dropped more than 70% from its peak in 2021.
Jana stated in the letter that “every present shareholder appears to have lost money on their investment,” despite the company’s unique manufacturing skills and its crucial role as an American supplier supporting the energy transition.
“The board’s efforts to reverse its woeful performance for shareholders must also include a commitment to promptly engage in a comprehensive review of strategic alternatives,” Jana managing partner Scott Ostfeld and the firm’s founder, Barry Rosenstein, wrote.
Strategic Funding Path
Jana urged the board to establish a “clear funding path” for upcoming costs, including subsidies from the CHIPS Act, and to create and meet KPIs and significant milestones for Wolfspeed’s two chip fabrication facilities in Mohawk Valley and Siler City.
The activist pointed out that Wolfspeed’s 10-year total shareholder return (TSR) is -61%, while the self-selected peer group’s median TSR is 331%.
Wolfspeed, formerly known as Cree, is a provider of semiconductors and electrical parts that are used to control energy, frequently in vehicles. It also offers the ingredients needed to make such chips.
Wolfspeed’s board, according to Jana, ought to “promptly” start a thorough assessment of the company, which could involve a sale. Jana referenced several analyst notes emphasising Wolfspeed’s capacity for M&A through either its divisions or the company as a whole.
In 2001, Barry Rosenstein founded Jana. In 2023, Scott Ostfeld was appointed managing partner of Jana. The activist has successfully engaged with Qualcomm, Freshpet, and New Relic. Jana has reportedly accepted jobs at Frontier, a telecom company, and Trimble.
About
The American company Wolfspeed, Inc. specialises in the development and production of wide-bandgap semiconductors for use in radio frequency and power applications, including wireless systems, power supplies, power inverters, and transportation. The company, founded in July 1987 in Durham, North Carolina, also produces silicon carbide and gallium nitride materials and devices. Formerly, the business was known as Cree, Inc.
