HO CHI MINH CITY/NEW YORK — Electric vehicle maker VinFast landed on Nasdaq with soaring share prices that just as quickly plummeted, raising questions about its valuation. Volatile trading pushed VinFast’s market capitalization past those of GM and Boeing this week, then down 44% in a day. Its valuation has been anywhere between $80 billion and $200 billion in the space of a week.
Though such dramatic movements captured headlines, they are based on a float of less than 1% of VinFast shares, with veteran short-seller Jim Chanos dismissing the company as a “meme stock,” or a craze fueled by social media interest.
Trading under the symbol VFS, the Vietnamese EV maker last month publicly listed 2.3 million shares, while 2.3 billion shares are controlled by founder Pham Nhat Vuong, according to U.S. Securities and Exchange Commission filings. When the price of the listed stock is multiplied by Vuong’s far larger holdings, the market cap reaches levels that analysts call inflated.
“VFS is bafflingly overpriced and bafflingly volatile,” said Owen Lamont, an analyst and former Yale finance professor. “When I see something with eye-popping valuation and giant [share] turnover, that is a sign of speculative frenzy.” VinFast, which has faced poor product reviews and a recall in the U.S., won’t “be fairly evaluated by a broader market” until a substantial amount of stock is floated and professional investors weigh in, economist Nguyen Huy Vu told Nikkei Asia.
“With this thin trading volume at the moment, one would guess that institutional investors would hesitate to get involved in the game and that the majority of the traders would be speculative ones with short-term trading,” Vu said.
One worry is that less experienced retail investors may jump into the trading out of a “mistaken belief that the stock price reflects the collective market judgment,” former Bank of America analyst Craig Coben wrote in FT Alphaville of the Financial Times. Skeptics say they do not see the manufacturer’s value proposition. VinFast said it delivered 11,300 EVs in the first half of 2023, mostly in Vietnam, less than the monthly sales of rivals like Tesla and China’s XPeng.
“We’ve seen many other SPAC companies go through microbursts of stock prices driven by speculation, especially in the electric vehicle sector,” Lux Research Senior Director Chris Robinson told Nikkei. “In reality, VinFast is entering a highly competitive electric vehicle market against well-established incumbents in the midst of a pricing war.”
The automaker merged with a special purpose acquisition company, or SPAC, called Black Spade as a shortcut to go public. In a traditional public offering, a company would go on a roadshow to pitch to institutional investors, giving them a chance to size up the business.
But as Robinson noted, competition for drivers is heating up. Tesla cut prices in the U.S. early this year and in China in August, the latter move being followed by its Chinese rivals. VinFast responded by reducing its own prices in the U.S.
In addition to being a rare U.S.-listed Vietnamese company — tech unicorn VNG hopes to follow in its footsteps this year — VinFast is the only company to export cars from Vietnam. It shipped 999 EVs to the U.S., all of which were recalled over a display malfunction in May.
Around the same time, U.S. industry reviews criticized the SUVs for their limited driving range and uncomfortable, bumpy rides. A spokeswoman told Nikkei that VinFast has models with longer ranges and a five-star safety rating from the New Car Assessment Program for Southeast Asia. She acknowledged the reviews and said the company is working to improve its offerings.
Individuals, meanwhile, have taken to X, formerly Twitter, to ask how to short VFS, or profit by betting it will fall. “I am guessing that VinFast is basically impossible to short due to the inability of short sellers to borrow shares,” Lamont, the analyst, said. “Even if you could hypothetically short the stock, I doubt that is wise given the volatility, as GameStop short-sellers learned,” he added, referring to an earlier example of a meme stock.
Traders had borrowed GameStop shares, betting they could return them by buying when prices fell. But online fans of the gaming store bid up its stock price, racking up losses for traders who then had to buy them at higher values. The tiny fraction of VinFast shares changing hands means the company’s float “resulted in almost no proceeds, no price discovery for the stock and no secondary market liquidity,” BoA’s Coben said.
VinFast in April said it would receive additional funding of $1 billion from Vuong, $500 million from Vingroup, and a potential $1 billion line of credit from its parent company. Two months prior, Bloomberg had reported the billionaire had “no plans as yet to personally invest any more money in VinFast.” To determine a reasonable share price, investors will have to see if the company has a sustainable business going up against fierce powerhouses from China, Europe and the U.S., Vu said.
“Those competitors already prove their capabilities and have certain market shares with brand names,” he said. “Therefore, it is really difficult for VinFast to break into such markets.” VinFast has exported EVs to Canada, with plans to follow suit in Europe and Southeast Asia. It unveiled its cheapest electric car yet, a $23,000 model for motorbike-mad Vietnam, where cheap Chinese rivals are streaming in, including Wuling’s $4,500 “alternative to walking.” “In the long term, the fundamentals of a company will justify its existence,” Vu said.
Source: NIKKEI ASIA