What happened
Less than two months after shares of VinFast Auto (VFS 10.41%) soared following its public offering, the stock dropped sharply today after the company warned of insider share sales. As of 12:37 p.m. ET on Wednesday, shares were down by 13%, and the stock was trading below its listing price.
So what
The Vietnam-based electric vehicle (EV) company soared more than 68% on its first day of trading on the Nasdaq exchange after going public through a special purpose acquisition company (SPAC). Much of those gains came because of the very low amount of shares available to trade. The company founder controlled about 99% of shares.
Now VinFast says it is releasing more than 46 million shares from lock-up restrictions that can go on the market. The company will receive all proceeds from those sales, net of expenses including commissions and fees.
In its filing announcing the share sale, VinFast said, "The market price of our ordinary shares could decline if the Selling Securityholders sell a significant portion of our ordinary shares or are perceived by the market as intending to sell them." That's what is happening today.
The filing noted that it released another approximately 26 million shares to be sold by other shareholders. Those proceeds won't go to the company, but they add to the downward pressure on the stock.
Now what
VinFast needs to pay for a factory it is building in the U.S., as well as expansion plans in Asian and Indian markets. But even after the decline from its lofty share price, the company still has a market cap of about $20 billion. For perspective, VinFast generated only $634 million in revenue in 2022.
The EV maker will announce its first quarterly report as a public company tomorrow, Oct. 5, before the market opens. Investors shouldn't expect too much progress yet, but it could make for more rocky trading in the stock.
