Shares of VinFast Auto, a Vietnamese electric-vehicle start-up, have been on a remarkable upward trajectory, soaring for six consecutive days. With a market capitalization of about $190 billion, the company seems to have achieved a stunning level of success. However, a closer look reveals that these astronomical gains may not be as promising as they appear.
At around $82.50 per share, VinFast’s stock has surged by approximately 20%. This places its market capitalization above that of General Motors (GM), Ford Motor (F), and Stellantis (STLA) combined, as well as surpassing BYD (1211.Hong Kong), China’s largest EV maker. Nevertheless, it is still only a quarter of the value of Tesla (TSLA), the leading EV manufacturer globally.
The numbers simply don’t add up. VinFast is not yet a profitable company and operates with only a fraction of the production capacity compared to its competitors. This surge in stock value seems to be driven by the hype surrounding meme stocks. It is worth noting that only a limited number of shares, around 16-17 million, are available for trading. The remaining 2.3 billion shares are held by insiders.
Despite the remarkable increase of 436% over just six days, the actual wealth generated for those holding shares available for trading is significantly lower. Approximately $1 billion in value has been created for these shareholders, a far cry from the overall market value surge. Additionally, it is highly unlikely that many investors have held the stock for the entire duration of these six days.
Over the course of this surge, around 65 million VinFast shares have been traded, and this number continues to rise. The available shares have changed hands four times on average, resulting in an average holding period of approximately 1.5 days.
While the insiders have amassed the majority of the $165 billion in newfound paper wealth, they are currently unable to sell their shares. If more stock trading were to occur, it would likely drive down the price. Finding buyers for thousands of shares is one thing, but finding buyers for millions becomes considerably more challenging.
The trading activity surrounding VinFast has been highly volatile, yet this is not due to a short squeeze. According to S3 Partners, short interest in VinFast stock has dwindled to nearly zero. Hence, it seems that traders are independently manipulating the values.
While the surge in VinFast Auto stock has attracted attention and created significant wealth on paper, it is crucial to remain skeptical about its long-term sustainability and real value. As always, caution should be exercised when investing in such unpredictable situations.