VinFast (NASDAQ:VFS) stock began trading on the Nasdaq on Aug. 15 after completing a merger with special purpose acquisition company (SPAC) Black Spade Acquisition. The SPAC deal valued VinFast at about $23 billion, although the company’s market capitalization is much higher than that today following roughly a week of volatile trading.
Meanwhile, short sellers already have their sights set on the Vietnamese electric vehicle (EV) company. According to data analytics firm S3 Partners, there were 1.2 million shares of VFS stock sold short as of Aug. 17. That’s out of a total of 2.32 billion implied shares outstanding, according to Yahoo Finance, which would mean about 0.05% of the shares are sold short.
However, short interest is based on public float, which Barron’s notes is between 17 million and 21 million shares. That would equate to a short interest of about 6%. On top of that, not all of the issued VinFast shares are trading, which would make the short interest figure even higher. That’s because SPAC insiders likely own some of these shares.
Short Sellers Open Bets Against VFS Stock
Meanwhile, the cost to borrow (CTB) fee for VFS stock is also abnormally high, tallying in at 74.04% and rising from 51.64% on Aug. 17. The CTB represents the annual fee that short sellers must pay to borrow stock. A high fee indicates high short seller demand, while a low fee indicates the opposite. The average CTB fee for a stock ranges between 0.3% and 3%. However, an abnormally high CTB fee could also influence short sellers to exit their positions by buying the underlying in an attempt to escape the high fee.
Still, market participants should try to remain on the sidelines with VFS stock for the time being, as newly public companies often face extreme volatility during their first few months of trading regardless of financial health. Furthermore, VinFast may also be at a disadvantage to domestic automakers in the United States, as its vehicles are built outside of the U.S. and ineligible for a $7,500 EV federal tax credit.
At the same time, VinFast announced in late July that it would begin construction on its delayed EV plant in North Carolina. The plant is expected to become operational in 2025, one year after its initial target of 2024.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
