What happened
Shares of VinFast Auto (VFS) stock collapsed in Wednesday afternoon trading, tumbling 12.4% through 1:55 p.m. ET. It's not a great secret why: VinFast insiders may be dumping the stock.
So what
Easily the world's most famous Vietnamese carmaker after going public in a SPAC IPO last month, VinFast has been pretty volatile since its debut, and today isn't going to change that story much. In a filing with the SEC this morning, VinFast notified of the potential sale of up to 75.8 million shares of its stock by company insiders.
Now, here's the thing: While VinFast has more than 2.3 billion shares of common stock issued and outstanding, according to data from S&P Global Market Intelligence, only about 1.4% of those shares are already "floating" and currently available to trade. That's 32.2 million shares floating. And VinFast wants to potentially unleash 75.8 million new shares on the market.
It's preparing to triple the number of shares on the market -- and this could crash the stock price.
Now what
Seeing those numbers and understanding their import, it's easy to see why traders are spooked today. After all, it's VinFast's ultra-low "float" that has made the shares so subject to the kind of volatility that can fuel the daily double-digit percentage gains and drops that attract day traders. Now, it appears that both a flood of new shares will both increase volatility short term and potentially decrease it over the longer term, potentially making this stock less attractive to trade.
A few caveats are worth highlighting. First and foremost, while VinFast is notifying of the potential for 75.8 million new shares to flood the market, in actuality the company anticipates that these shares will only be sold "from time to time," and so not necessarily all in one gigantic flood.
That's the good news. The bad news is that the persons selling these shares are all current inside shareholders of the company, and the majority of the shares that may be sold belong to "Company Selling Security Holders" that are companies "majority-owned by [VinFast's] founder and Chairman."
That doesn't exactly inspire confidence in the stock's future, on the part of the person best positioned to know what that future looks like. Combined with the trading implications for the stock, I think it gives investors good reason to be cautious about VinFast stock going forward.
