VinFast soared as much as 830% since it went public via a SPAC IPO earlier this month.
The Vietnam-based electric vehicle maker released its cars on the US market earlier this year.
The small float of available shares of VinFast could be the main factor behind the sharp stock rally.
A new electric vehicle company is making waves on Wall Street, but not because of the cars it's selling.
Vietnam-based VinFast has seen its stock soar as much as 830% since it went public via a SPAC IPO earlier this month. The company manufactures and sells electric vehicles and entered the US market for the first time earlier this year.
At its peak of $93 per share on Monday, VinFast's near-$200 billion valuation made it the third most valuable car company on paper after Tesla and Toyota. In fact, even after coming well off its highs, the company is currently worth more than Ford and General Motors combined.
But it's not the company's lineup of cars or strong sales that's driving this stock. VinFast expects to sell just 50,000 vehicles this year, and the early reviews of the cars have not been favorable.
"Return to sender. VinFast has the right idea, but the VF8 is nowhere near ready for the customer deliveries that are already happening," MotorTrend wrote in May.
So why is VinFast stock so high?
Other much-hyped EV stocks like Rivian, Lucid, and Faraday didn't see such massive spikes when they first went public. So what gives with VinFast?
It's likely the company's tiny float of available shares to trade has sparked an imbalance in the supply and demand, leading to the soaring rally.
Founder Pham Nhat Vuong controls 99% of VinFast, as he issued just 1% of the company's shares to the public. While there are 2.32 billion shares of VinFast outstanding, there's a float of just 7.2 million shares available to the public to buy or sell.
And high redemptions of the SPAC after the VinFast deal was announced suggest there could be just over 1 million shares available to trade.
Low-float stocks like VinFast are susceptible to high volatility and jaw-dropping moves, both to the upside and the downside. And it doesn't take much buying or selling pressure to move the stock, given the lack of supply of shares.
VinFast fell 26% Tuesday, and the stock could continue to fall as more shares flood the market. There are several lockup agreements between the company, insiders and the SPAC sponsor that could result in the sale of millions of shares when they expire.
Share sales can also come directly from VinFast as it needs to raise money if it wants to fuel its expansion into the US market. The company had about $160 million in cash at the end of March, so it could be eager to take advantage of the recent spike in its stock by selling shares at current prices.
Short-seller Jim Chanos isn't buying into the VinFast hype. He called it a "$200 billion meme stock" and said "If $VFS is lucky, they will do 40K units this year. Toyota will do 40K units in the next 40 hours."
But because of the low float and high volatility, it's unlikely any short-sellers are jumping in to bet against the company just yet.
Read the original article on Business Insider