Retail investors played ‘the greater fool’ when VinFast shares plunged after 504% rally 

In episodes strikingly similar to those in the wildest moments of the early pandemic — think GameStop Corp. and AMC Entertainment Holdings Inc. — investors are frantically bidding up obscure stocks only to then watch them crash spectacularly. The very latest example: VinFast Auto Ltd, an unprofitable electric-vehicle maker that at the zenith of a four-week trading frenzy had a market value greater than McDonald’s Corp. and four times that of General Motors Co. The stock has sunk roughly 80% in the eight days since.

It all suggests that the greater fool theory has now become a prominent, and perhaps permanent, feature of the investing landscape in a country where gambling on everything from football to table tennis to whether Britney Spears will get married next year is now just a click away.

VinFast became the latest “lottery ticket,” said Peter Atwater, an adjunct professor of economics at William & Mary. “The characteristics tend to be very consistent: find something that has dream-like possibility and can be manipulated by a crowd that’s moving in lock-step.”

As shares of VinFast, a Vietnam-based company, started to mysteriously skyrocket in mid-August, scores of day traders piled in to the trade to help fuel a six-day 504% rally.

Buy order flows from Fidelity’s platform and activity on popular chat forums like Reddit’s WallStreetBets and StockTwits indicate many in the retail crowd arrived too late, snapping up the stock just as it was about to start to plunge. They, in other words, played the greater fool.

The boom mirrors risky bets investors placed on other companies that went public through blank check deals over the past year like Grindr Inc. and Intuitive Machines Inc. One crucial aspect to these de-SPACs (special purpose acquisition companies that completed deals) as they’re known on Wall Street — is that over the past 18 months only a tiny percentage of the stock floats in the market, making them easy to drive higher or lower.

Over the past year, at least five de-SPACs saw shares surge more than 500% before shedding gains. Many of those had small pools of shares available for trading, drawing groups of investors across social media sites like X, formerly known as Twitter, and Reddit to churn up interest in hopes of getting others to join in on the action.

In VinFast’s case, roughly 1% of the stock is available to trade and the timely listing of call options, an easy way to push stocks even higher, set the stage. In a six-day stretch the stock went from around $15 to trade as high as $93, before gravity triggered an eight-day slide to send them back to $17.15.

Even after a record losing streak, VinFast’s market value sits at nearly $40 billion. The company’s chairman and founder, Pham Nhat Vuong, controls 99% of the stock, however, the terms of the blank-check deal prevent him from selling. It’s a company reminiscent of Rivian Automotive Inc. and Lucid Group Inc., which saw huge rallies before plunging as Wall Street grappled with their abilities to reliably make and sell vehicles. Each stock is down close to 90% from their record intraday highs, implying VinFast’s still-lofty valuation could have some way to go.

But that won’t deter traders, many of whom started investing during the pandemic. Spurred by free money and personalities like Barstool Sport’s David Portnoy, they bet on stocks as they would table games at a Las Vegas casino.

“The market landscape really changed with Covid when you had a generation of people sitting in front of computers realizing they can trade stuff and organize on Twitter or Discord,” said Matthew Tuttle, chief executive of Tuttle Capital Management.

“The ability that I’ve got now to gamble from my phone on anything — I can play blackjack, poker, bet on sports, gamble on stocks — certainly you’re going to have a generation of degenerates out there doing that,” he added.

— With assistance by Annie Massa