VinFast’s Stock Surge Is a ‘Coin Toss’ for Investors

Boasting a higher market capitalization than General Motors Co. and Ford Motor Co. put together, loss-making VinFast Auto Ltd. raises a familiar question for EV investors: how long can it hold its stellar gains.

(Bloomberg) — Boasting a higher market capitalization than General Motors Co. and Ford Motor Co. put together, loss-making VinFast Auto Ltd. raises a familiar question for EV investors: how long can it hold its stellar gains.

Wild swings since its first day of trading as a public company recall cautionary tales when it comes to electric vehicle makers, with Rivian Automotive Inc. and Lucid Group Inc. among those now trading well below their peaks.

“Over the next month this is going to be a coin toss,” Nicholas Colas, co-founder of DataTrek Research, said in a phone interview. “This is like a turbo-charged Rivian or Lucid, because there is so little of this stock available, and so anyone who walks in and buys 100,000 shares can move the stock.”

The shares are up 23% on Friday.   

VinFast is up 369% after its debut last week on the Nasdaq Global Select Market through Thursday’s close, following its merger with special-purpose acquisition company Black Spade Acquisition Co. It surged more than 100% on Tuesday alone with a “pretty high” proportion of retail investors — about 10% of total turnover — participating in the rally, according to Vanda Research’s Marco Iachini.

A small float of about 1.3 million shares exaggerates moves in either direction. Regulatory filings show Pham Nhat Vuong, Vietnam’s wealthiest man and VinFast’s founder, controls about 99% of the entity, partly via shares held by his wife and Vingroup JSC.

Still, the performance may raise eyebrows given VinFast’s electric cars have been dogged by poor reviews. Its forecast for units sold this year is less than 1% of what General Motors Co. achieved in 2022, according to Bloomberg calculations. In May, it recalled all the electric sport utility vehicles it had shipped to the US over a software defect. The firm expects more near-term operating and net losses as it scales vehicle production.

VinFast closed Thursday with a market capitalization of $113 billion. Of the other 26 Nasdaq companies with such a valuation or higher, none had annual sales of less than $12.7 billion in the most recent year. VinFast had revenue of $633.8 million in 2022. 

The industry faces headwinds. Demand for EVs has shown signs of slowing, prompting companies to drastically cut prices, led by Tesla Inc. That’s bad news for profit margins. And for startups that are bleeding money with every car that rolls off their production line, it pushes the much-coveted goal of turning profitable even further into the future.  

Still, while not all hyped startups will succeed, the transformation of the global auto industry will create some big winners. According to an analysis from Bloomberg New Energy Finance, global annual EV sales are set to hit about 27 million by 2026, from 10.5 million in 2022.

For Colas, VinFast’s investor appeal lies in it covering the bases of EVs and emerging markets. Even at its lowest point recorded last week, it was the largest pure-play EV-maker listed on the US stock market after Tesla and China’s Li Auto Inc. 

“We are going through a phase in the auto market, the likes of which we have not seen in more than a hundred years,” George Gianarikas, an analyst with Canaccord Genuity, said in an interview. “The market is right to assume that maybe new geographies will gain market share.” 

Tech Chart of the Day

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Earnings Due Friday

  • Premarket
    • No major earnings expected
  • Postmarket
    • No major earnings expected

–With assistance from Subrat Patnaik.

(Adds latest stock move in fourth paragraph, updates first chart.)

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