VinFast made its entry into the Nasdaq Global Select Market Index on August 15
VinFast, the once unprofitable Vietnam electric car manufacturer has become the third most valuable vehicle manufacturer in the world, even surpassing the value of Ford and GM combined. The shares of VinFast have increased 700% since mid-August. The interesting aspect is that the company hasn’t made many cars yet. VinFast made its entry into the Nasdaq Global Select Market Index on August 15. The company is now worth under $200 billion, just behind Tesla Inc and Toyota Motor Corp.
A Rampant Share Price Surge
The reason why the share price increased rapidly is shortage. Only 1% of VinFast’s shares are available for trading. So what happens is when a buyer grabs a large portion of the few shares, it can have an outsize effect on the overall price of the stock. According to the data from official filings, Vietnam’s richest man Pham Nhat Vuong controls 99% of VinFast’s outstanding shares.
But even after all this, we can’t say that VinFast is profitable since it is a young company. Manufacturing cars is also a business that requires a huge amount of capital investment. VinFast also lost nearly $598 million in three months from March, reports Bloomberg. During the same time, the company generates around sales of $65 million.
VinFast also expects to have more losses in the coming months as it plans to scale up production, build more factories, and bolster its sales, marketing, and service activities. The company had already begun building a factory in North Carolina in July and predicts sales of 45,000 to 50,000 this year and according to experts, the company would start to have profits only by 2025. VinFast’s prediction for units sold this year is less than 1% of the sales GM achieved in 2022, reports Bloomberg.
VinFast has also been dealing with negative reviews that could affect its consumer confidence and brand name. Le Thi Thu Thuy, VinFast’s chief executive officer told Bloomberg that it takes negative reviews seriously and reflects on these reviews to make their vehicles better.
Share Price Surge and Pham Nhat Vuong
The share price surge has benefitted Pham Nhat Vuong and for now, he is a much richer man than before. Vuong’s stake in VinFast was worth $86 billion as of Monday’s close. This combined with his remaining wealth would put him on the list of the world’s richest 500 people in Bloomberg’s Billionaires Index. However, considering the company’s volatile nature, Bloomberg’s index excludes Pham Nhat Vuong’s stake from his net worth. This leaves him with a $5 billion fortune including his shares in Vingroup JSC.
Will the share price plunge?
Well, nothing is truly predictable when it comes to the market, and according to previous history, VinFast could be subject to sudden sell-offs. Incidents of stocks with tiny free float rise from non-recognition to the position of the world’s largest companies are plenty and one thing common is that none of it ended well. AMTD Digital Inc., another US-listed company with its foundation in Asia, ascended more than 32,000% in the span of a few weeks. AMTD’s shares plunged more than 99%, falling to a record low last week. Now the valuation stands at $1.2 billion.
There are also substantial risks involved in investing in the company. Tyler Manh Dung Nguyen, Maybank analyst stated that VinFast is comparatively new to the electric vehicle industry and it will take some time to boost its sales and build a brand name. The company faces a lot of challenges especially because it is new and some of the hurdles include rising inflation, global chip shortage, and of course competition from well-established players in the sector like Ford, GM, or Tesla.