VinFast stock has been making headlines recently. After listing on the Nasdaq in mid-August, the stock shot up spectacularly, briefly making the Vietnamese electric vehicle (EV) manufacturer the third-most valuable automaker globally behind Tesla and Toyota.
Thinking of buying VinFast stock? Here are five things to know about the company.
1. Company history
VinFast was founded in 2017 and launched its first vehicles around five years ago at the 2018 Paris Motor show.
Since then, it has had a considerable amount of success in Vietnam, with some of its cars becoming best sellers in 2020.
In 2022, the company launched showrooms in the US, Canada, and Europe in an effort to expand globally.
In doing so, it became the first Vietnamese car company to expand into global markets.
2. SPAC deal
On 15 August 2023, VinFast went public via a SPAC (Special Purpose Acquisition Company) merger with Black Spade Acquisition.
A SPAC is a way for a company to go public without all the paperwork needed for an Initial Public Offering (IPO).
On its first day of trading, VinFast stock shot up as a result of investor enthusiasm. And it continued to rise in the weeks following its market debut, with its market cap rising to a staggering $190 billion at one point.
However, since late August, the stock has been trending down.
Currently, it has a market cap of $38 billion, according to Google Finance.
3. Low free float
As for why VinFast stock has been so volatile, a lot will be related to the fact that it has an extremely low free float.
According to regulatory filings, Founder Pham Nhat Vuong – who is founder of parent conglomerate Vingroup and Vietnam’s richest man – controls 99.7% of the company’s 2.3 billion outstanding shares.
This means that there is a very limited number of shares for investors to trade.
A low free float like can result in explosive share price movements, both to the upside and the downside, because even a small change in the demand for stock can impact the price significantly.
4. Delivery numbers
Turning to delivery numbers, VinFast is hoping to sell 50,000 EVs this year (versus 1.8 million for Tesla). That would represent around seven times the number of vehicles it sold in 2022.
However, investors should take this 2023 target with a grain of salt. In recent years, we have seen many EV start-ups, including the likes of Rivian and Lucid, struggle to hit their production and delivery targets due to operational setbacks and supply chain issues.
It’s worth pointing out that to hit its target of 50,000 EVs, VinFast will have to achieve more than twice the deliveries notched up between January and July in the final five months of the year.
5. High valuation
As for the company’s valuation, VinFast doesn’t have a price-to-earnings (P/E) ratio because the company is not yet profitable. In 2022, the company lost $2.1 billion.
However, it does have a price-to-sales ratio, and this is high.
Prior to its SPAC merger, VinFast had a 2023 revenue target of $1.875 billion. If we use this figure for estimated 2023 sales (there’s a chance the company will miss this target), the forward-looking price-to-sales ratio here is about 20.
To put that figure in perspective, Tesla has a price-to-sales ratio of around nine at present while Rivian and NIO sport ratios of seven and five respectively.
VinFast summary
In conclusion, VinFast is an interesting company that appears to have plenty of growth potential.
However, the company has a high valuation and therefore could be a risky investment.
It’s worth noting that the majority of companies that have come public via SPAC deals in recent years have been poor investments.
This is something to keep in mind with VinFast stock.
Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
Before establishing himself as a writer, Edward earned a Commerce degree from the prestigious University of Melbourne. Complementing his academic background, he holds the esteemed Investment Management Certificate (IMC) and is a proud holder of the Chartered Financial Analyst (CFA) qualification.
Widely recognized as a sought-after investment expert, Edward’s insightful perspectives and analyses have been featured on sites such as BlackRock, Credit Suisse, WisdomTree, Motley Fool, eToro, and CMC Markets, among others.
