In the notable stock charts of the year category, VinFast (NASDAQ:VFS) has to make the list. Shares of VFS stock went public via a reverse special purpose acquisition company (SPAC) merger in August. Shares of the Vietnamese electric vehicle (EV) startup soared from their $10 SPAC price to $93 per share in a matter of a few days. However, since that late-August surge, shares are now down to the $15 level at the time of writing, with a more than 10% decline seen since yesterday alone.
Today’s decline appears to be a result of news that the company has updated its structure, allowing early SPAC backers to exit earlier than expected. Following the company’s Q2 results today, VinFast announced it was lifting lockups to increase the liquidity of its shares that trade. Currently, it’s estimated that “less than 1% of the company’s shares are available to float freely, contributing to massive volatility.”
It appears investors are focusing on this lifting of lockups more than the company’s results, which showed impressive growth. Let’s dive into what to make of today’s move.
VFS Stock Sinks as Early SPAC Investors Exit
If it’s really the case that VinFast’s move to lift its lockups is intended to increase the liquidity of its stock, this move should be a non-issue. Indeed, the fact that so few of the company’s shares trade in the open market can lead to significant volatility in the near term, something long-term investors aren’t likely to want.
Additionally, given the fact that the company’s revenue more than doubled on a year-over-year basis this past quarter, it’s clear that VinFast is growing, well, fast. This is an EV stock that many have cited as a potential future Tesla (NASDAQ:TSLA), given its size, scale, and growth potential, particularly in Asia. That said, the company’s high cash burn rate (nearly $900 million during the first half of this year) is a point of concern for many investors.
The question with this stock has thus shifted from whether it can generate cash flow in a reasonable amount of time. So why are insiders looking to exit the stock?
Well, if this company is worth anything near the $93 per share it attained earlier this summer, then insiders should be looking to keep these lockups in place.
On the date of publication, Chris MacDonald did not have (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.
