Activist investor Jana Partners is urging Wolfspeed Inc, the world's largest silicon carbide maker, to explore all ways to improve shareholder value, including a potential sale, according to a letter seen by Reuters.
Jana, who owns a "significant" stake in Wolfspeed, wrote in the letter that for the 37-year-old, $2.8 billion company, it was time to seek "all avenues to improve WOLF's performance" and begin a "comprehensive review of strategic options."
In a letter to its board, the Durham, North Carolina-based company said: "This exploration of alternatives may uncover multiple ways to highlight and realize value, including through a sale. ”
A Wolfspeed representative did not immediately respond to a request for comment.
Headquartered in Durham, Wolfspeed introduces silicon carbide, a next-generation semiconductor material used in a variety of applications, from electric vehicles to grid systems. As a leader in new technology, the company has a niche market, according to company executives.
But Craig Irwin, managing director and senior research analyst at Roth Capital Partners, said he wasn't surprised by the aggressive shareholder report because Wolfspeed's stock has been in the spotlight lately. "These are usually patient investors, but even patients are getting impatient now," he said. While Irwin agrees with Wolfspeed management that the market potential for silicon carbide is huge, "it's not easy to get it off the ground," he said.
Building a large materials factory will not solve investors' concerns.
"It looks like the technology is always more challenging in production than expected," he said. Owen said that even if Wolfspeed considered selling, it would have to be a "behemoth." "The list of these people is very short," he said. "Anything is possible, but I'm not sure it will progress faster under a different leadership. ”
Irwin says that any company that wants to acquire Wolfspeed asks two questions: Can we do it faster and can we bring something new to the table?
Wolfspeed was founded at North Carolina State University, and executives at the company insist that demand for what they're trying to do far outstrips supply. They kept calling for patience on the earnings call.
"There will always be many twists and turns in the course of a transformative industry shift, but we believe we are in a unique position to leverage the deep domain expertise we've built up over the past decades and turn it into a clear advantage," CEO Gregg Lowe said in January. "Today, we are the world's largest producer of silicon carbide materials. We have long-term supply agreements with major power device manufacturers around the world. ”
Wolfspeed's share price has plummeted nearly 50% since January, and its value has fallen 63% in the past 52 weeks as the company has failed to meet financial and operational milestones, leading investors to worry about its strategy and capital allocation at a time when its growth expectations have fallen short of expectations. The core EV end market has slowed.
In the letter, Jana said that despite the company's differentiated manufacturing capabilities and key role as a U.S. supplier to support the energy transition, every existing shareholder appears to have lost money on their investments.
Jana managing partner Scott Ostfeld and firm founder Barry Rosenstein wrote: "The board's efforts to reverse the poor performance of shareholders must also include a commitment to an immediate and comprehensive review of strategic alternatives. ”
Goldman Sachs, an investment bank, has set an M&A price target of $126 per share for the company, a nearly 500% premium to Wolfspeed's current share price of $22.12 on Monday, the letter said.
The company also said Coherent's recent sale of a minority stake in its silicon carbide business to two Japanese companies, DENSO and Mitsubishi Electric, highlights Wolfspeed's strategic value.
Jana called for a "back to basics" strategy that prioritizes execution and achievement of key milestones at Wolfspeed's New Mohawk Valley and Siller City facilities, setting realistic goals and demonstrating a path to an acceptable return on capital.
The letter also urges the company to reassess the size and timing of future investments, including the planned European manufacturing plant, until Wolfspeed shows it can deliver on its existing operations.
Jana owned a minority stake in Wolfspeed in the third quarter of 2023, but the company's stake was not listed in the fourth quarter of 2023 regulatory filing.
Jana has a 23-year track record of investing in companies, including Frontier Communications, which recently launched a formal strategic review under pressure from Jana, and Freshpet has seen a return of about 250% in the two years since Jana began working with the company.
Prior to that, Jana had driven change for companies such as Whole Foods Market, which sold itself to Amazon in 2017.
Link to original article
https://finance.yahoo.com/news/exclusive-activist-jana-letter-urges-170745969.html
Source | Semiconductor Industry Watch (ID: icbank) synthesized from Reuters
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