Vietnam's VinFast Auto (NASDAQ: VFS) has remained a spectacularly volatile stock ever since its market debut back in August 2023, having surged from the $30 price handle all the way to $93, only to see the share price plummet to around $15, all within the span of just a few weeks. This historic bout of volatility - driven, at least in part, by the stock's puny share float - might be about to end now.
As a refresher, VinFast currently retails two compact electric SUVs - the VF6 and VF7 - as well as two eSUVs - the VF8 and VF9 models - in the US. The company's production is primarily based within a "fully digital" $1.5 billion, 828-acre facility on the Cat Hai island in Vietnam. The EV player delivered around 11,315 vehicles in the first half of 2023, with the full-year deliveries expected to materialize at around 25,000 units.
As per the recently released financial statements, VinFast earned $417 million in revenue during the first six months of 2023 and reported a net loss of over $1.1 billion.
"Currently, more than a quarter of available @VinFastofficial shares are shorted, but that still only equates to about $31 million of capital, according to data provider #S3Partners."#S3data@StephenWilmot $VFS $TSLA #EVs #stockshttps://t.co/U4hrLzMTRj
— S3 Partners (@S3Partners) September 21, 2023
To say that VinFast has a minuscule share float at the moment would be quite an understatement. As is explained in the above tweet, over a quarter of the company's current share float is sold short at the moment. However, this short interest only equates to about $31 million! In fact, this tiny share float has been quite significant in propelling VinFast's legendary volatility. This regime, however, is likely to end soon.
Last week, VinFast filed an amended Form F-1/A with the SEC, announcing that in conjunction with over 46 million shares that have been released from their lock-up period, a total of 72.084 million shares - equating to 3.1 percent of the company's outstanding ordinary shares and worth around $1.135 billion at the current stock price - will soon become part of VinFast's active share float.
During the company's earnings call, VinFast's CFO specifically cited the dearth of liquidity in the stock as a major stimulant for lifting the share lock-up.
While such a significant increase in the company's share float will undoubtedly come with a deluge of selling pressure, one that might well push the stock to its fair market value of around $5 per share, the move will nonetheless restore some semblance of normalcy to the wildly volatile stock, making it all the more difficult for a relatively nominal dollar amount to move the needle on VinFast's stock price.
In finance, volatility is considered an inherent measure of overall risk. VinFast's shares are expected to become less volatile in the aftermath of the oncoming selling pressure, which might be sufficient to remove them from the meme stock category, thereby laying solid foundations for sustainable capital gains for investors in the years ahead.
EXCLUSIVE-VINFAST TO DELIVER EVS TO EUROPE THIS YEAR AS EU PROBES CHINA RIVALS (Reuters)
Vietnamese electric vehicles maker VinFast plans to ship its first EVs to Europe this year after receiving regulatory approval, as the EU considers imposing tariffs on its Chinese rivals. pic.twitter.com/vFHAdO1HMV
— FXHedge (@Fxhedgers) September 21, 2023
Meanwhile, VinFast continues to pursue aggressive expansion with admirable gusto. The company is expected to enter the EU later this year as the regulatory noose around Chinese EV players appears to be tightening within the bloc over unfair state subsidy concerns.
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