Wolfspeed to get up to $750M in proposed CHIPS Act funding

Shares of Wolfspeed (NYSE:WOLF) climbed around 10% Tuesday morning after the Biden-Harris administration announced plans to provide up to $750M in direct funding to the EV chipmaker.

The U.S. Department of Commerce and Wolfspeed (WOLF) have signed a non-binding preliminary memorandum of terms (PMT) for the proposed direct funding under the CHIPS and Science Act that will support Wolfspeed’s North Carolina expansion.

The PMT includes an obligation for Wolfspeed to raise an aggregate of $750M in debt financing over three tranches through the issuance of senior notes under an amended and restated indenture.

In addition, a consortium of investment funds led by Apollo, The Baupost Group, Fidelity Management & Research Company and Capital Group have agreed to provide Wolfspeed an additional $750M of new financing.

Wolfspeed (WOLF) also expects to receive $1B of cash tax refunds from the advanced manufacturing tax credit under the CHIPS Act (section 48D), giving the company, in total, access to up to $2.5B of expected capital to support the expansion of silicon carbide manufacturing in the U.S.

These proposed funds, which are expected to be received upon milestone achievements in the coming years, would enable the company to complete its multi-billion-dollar greenfield U.S. capacity expansion plan, which consists of the largest and most advanced 200mm silicon carbide footprint in the world.

This multi-billion-dollar investment will bolster Wolfspeed’s balance sheet and will help to fuel significant growth through cash generation and accelerate its long-term profitability goals, the company said in a statement.

The CHIPS Act funding aims to increase U.S. semiconductor manufacturing and research, especially in advanced semiconductors. Several companies including, Intel (INTC), SK hynix, Samsung (OTCPK:SSNLF), Taiwan Semiconductor Manufacturing (TSM), Micron Technology (MU) and Texas Instruments (TXN) are getting funds under the act.