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Shares of electric vehicle startup VinFast soared. The new public company is worth more than Ford Motor and General Motors.
Nhak Nguyen/AFP via Getty Images
VinFast Auto
Stocks are back again, and rose sharply in Tuesday’s trading. Big wins attract traders like bees to honey. It’s a good idea not to lose perspective in a bout of FOMO or fear of missing out.
Shares of the Vietnamese electric vehicle startup were up about 125% at midday at about $40 a share, while
Standard & Poor’s 500
flat f
NASDAQ Composite
It rose 0.3%. Stocks hit a record high on Tuesday.
This does not appear to be a reason for the move. Shares of VFS began trading last week, shortly after the company closed its merger with a special purpose acquisition company. Prior to the merger, the stock symbol was “BSAQ”.
“VFS” stock went nearly $37 from $10 in the blink of an eye. SPAC-linked stocks can be volatile when they start trading. There are two reasons for this. For starters, only a tiny fraction of the 2.3 billion outstanding shares of VinFast are available for trading, which creates a supply/demand problem. There is also no Wall Street coverage to help investors with financial projections and relative valuations.
Relative evaluation simply does not make sense. VinFast isn’t profitable and lacks positive free cash flow, but at around $40 a share it has a market capitalization of about $90 billion — topping both
Ford Motor
(F) f
general motors
(GM). It is also worth nearly four times as much
Rivian Motors
(RIVN), which sells more cars. It is also more valuable than
Lee Otto
(LI), a profitable EV company that sells far more cars than VinFast or Rivian.
VinFast sold about 11,300 vehicles in the first half of 2023. During that time, Rivian sold about 20,600 vehicles while Li sold nearly 140,000 vehicles. Li shares trade at approximately 2.5 times estimated 2023 sales; VinFast stock is traded at about 47 times.
Barron He wrote that VinFast stock was very expensive last Wednesday; It had closed at $37.06 the day before, when it started trading as “VFS”. We felt on Friday, and we feel today, that it’s still very expensive.
What should investors who have not yet bought do? Maybe just wait. The SPAC deal valued VinFast at about $23 billion, which is about $10 a share. It should be the starting point for the analysis. At this point, would investors prefer owning VinFast or, say, Rivian?
We’ll wait too. Inventory is likely to drop in the coming months, if not sooner. The path it will take could cure investors of FOMO.
Write to Al Root at [email protected]
