Wolfspeed's $1.5 billion Pentagon loan is a letter, not a check

Wolfspeed shares catapulted more than 25% in early post-market trading on Wednesday, 27% by Reuters' count, for money that does not exist yet. ²³ What landed after the bell was a conditional commitment letter↗: up to $1.5 billion of senior secured delayed-draw term loans from the Department of War's Office of Strategic Capital. ¹

Thirty years of cheap money, if it ever arrives

The terms explain the bid: a 30-year maturity, a 36-month draw window, an initial $600 million tranche and $900 million more in $200–400 million slices, at the Treasury rate plus a provisionally 1.25–1.75% risk premium, with five years of interest that can be capitalized into principal. ¹ The first use of the cash is not a wafer but the balance sheet: the initial tranche would refinance in full the first-lien notes due 2030, atop $1.78 billion of debt principal carried a year out of Chapter 11. ¹⁴

The first $600 million buys out the bondholders

Those notes carried $635.9 million of principal at June 28, 2026↗, at a 12.9% effective interest rate, the top of a stack that also holds three convertible issues totaling $849.7 million. ⁴ The Pentagon's provisional spread is less than half that rate. The after-hours buyer bought none of that credit, only stock in a company guiding the September quarter to $140–160 million of revenue↗ with non-GAAP gross margin expected to remain negative, as it has been in each of the five quarters on file since late 2024. ⁷⁸

$750 million of private cash comes before a single draw

Nothing in the letter is funded. The deal-wide gate is a $750 million Minimum Contribution of Qualifying Sources received after June 28, 2026, released tranche by tranche: at least $150 million against the initial tranche, $600 million across the rest. The first $150 million must be new equity sold to third parties unaffiliated with the U.S. government: $50 million before the facility becomes effective, $100 million more before the second tranche funds. ¹

Wolfspeed's news log↗ since the June year-end lists product launches, a board hire and a patent suit, no capital raise; the $475.9 million first-lien paydown in March was funded before the clock started. ⁵⁴

And Congress still has to approve it

Equity is not the only gate. Wolfspeed must also push to equitize a substantial majority of its convertibles, sign offtake agreements acceptable to the OSC, and clear due diligence "to its satisfaction in its sole discretion", while the loan still requires Congressional authorization, appropriations and OMB concurrence, each beyond the company's control. The filing's own words: no assurance of definitive agreements at all. ¹

Washington buys wafers, warrants and a board observer

The OSC announcement↗ is unabashed about the objective: silicon carbide and gallium nitride as "critical dual-use capabilities" for "the era of Super Intelligence", feeding directed energy, radar and missile defense. ⁶ Wolfspeed's side of the bargain is a Project Undertaking, secured by the company's assets, to build out domestic SiC wafer and device production, onshore GaN, GaN-on-SiC radio-frequency epitaxial wafers and radiation hardening. ¹

The price of admission is governance: warrants over 7.5% of fully diluted equity struck at VWAP, exercisable at any time across ten years, with anything unexercised self-exercising cashless immediately before expiry, and only if in the money; a non-voting board observer; a majority-US-citizen board; and change-of-control locks. ¹

Wolfspeed must sell $50 million of stock into its own pop

A company whose equity just gained a quarter on a letter must now sell new shares into that strength and equitize most of its convertibles before a government dollar moves. ¹ Tonight the market priced the headline; the filing prices the risk for the next 30 years.