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Shares of electric-vehicle start-up VinFast are surging. The newly public company is worth more than Ford Motor and General Motors.
Nhac Nguyen/AFP via Getty Images
VinFast Auto
stock is at it again, skyrocketing in Tuesday trading. Big gains attract traders like bees to honey. It’s a good idea to not lose perspective in a bout of FOMO, or fear of missing out.
Shares of the Vietnamese electric-vehicle start-up are up about 125% in midday trading at almost $40 a share, while the
S&P 500
is flat and the
Nasdaq Composite
is up 0.3%. Shares hit a record high Tuesday.
The doesn’t seem to be a reason for the move. Shares of “VFS” started trading this past week shortly after the company closed its merger with a special-purpose acquisition company. Before the merger, the stock symbol was “BSAQ.”
“VFS” stock went to roughly $37 from $10 in the blink of an eye. SPAC-related shares can be volatile when they start trading. There are a couple of reasons for that. For starters, a tiny fraction of VinFast’s 2.3 billion shares outstanding are available to trade, creating a supply/demand issue. There is also no Wall Street coverage to help investors with financial projections and relative valuations.
Relative valuation simply makes no sense. VinFast isn’t profitable and lacks positive free cash flow, but at about $40 a share it has a market capitalization of about $90 billion—topping both
Ford Motor
(F) and
General Motors
(GM). It’s also worth roughly four times as much as
Rivian Automotive
(RIVN), which sells more vehicles. It’s also more valuable than
Li Auto
(LI), a profitable EV start-up that sells far more cars than either 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 almost 140,000. Li stock trades at roughly 2.5 times estimated 2023 sales; VinFast stock trades at about 47 times.
Barron’s wrote that VinFast stock was too expensive last Wednesday; it had closed at $37.06 the previous day, when it began trading as “VFS.” We felt Friday, and feel today, that it’s still too expensive.
What should investors who haven’t bought in yet do? Probably just wait. The SPAC deal valued VinFast at about $23 billion, about $10 a share. That should be the starting point for analysis. At this point, would investors rather own VinFast or, say, Rivian?
We’ll wait, too. The stock will likely be lower in the coming months, if not sooner. The path it will take could cure investors of FOMO.
Write to Al Root at allen.root@dowjones.com