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VinFast’s Meteoric Nasdaq Rise Stirs Investor Concern Over Valuation

In the capricious theatre of the stock market, anomalous tales occasionally unfold. Such is the narrative of VinFast, Vietnam’s electric vehicle (EV) arm of conglomerate Vingroup, which saw a dizzying rise in share value following its August 15 listing on the US Nasdaq through a Special Purpose Acquisition Company (SPAC).

The company, which predominantly uses batteries from Samsung SDI, thereby arousing considerable interest in South Korea, began trading at $22 per share. The stock has since experienced a volatile journey, closing at a record high of $82.35 on August 28. This positions VinFast’s market capitalisation at $158.6 billion—surpassed only by industry titans Tesla and Toyota, according to Reuters.

VinFast’s soaring valuation eclipses the collective market cap of Stellantis, the parent entity of General Motors, Ford, and Chrysler. It also exceeds double the market cap of China’s largest EV manufacturer, BYD. However, a chorus of Wall Street observers has raised red flags, questioning the Vietnamese company’s exorbitant valuation based on three critical factors.

Liquidity Crunch
Firstly, VinFast’s shares suffer from a paucity of liquidity. Of the roughly 1.3 million shares listed, less than 1% are freely traded. The vast majority are held by Palm Nut Vuong, VinFast’s founder and the chairman of Vingroup. This restricted float, Bloomberg warns, makes the company’s share price susceptible to dramatic swings.

Financial Viability Questioned
Financial stability, or rather the lack thereof, stands as the second caveat. With cash reserves amounting to a meagre $158 million against a debt pile of $2.6 billion, the company, established only in 2017, has accumulated losses nearing $6 billion. Observers suggest that VinFast may soon have to dilute its stock to raise additional capital, particularly if it seeks to scale production.

Quality Control
Thirdly, doubts have been cast on the quality of the company’s EV offerings. American auto media outlets, including Motor Trend and Car and Driver, have criticized the company’s premium EV SUV, the VF8, implying that the vehicle is far from ready for prime time.

Despite the high valuation, the performance indicators are not promising. The company has set an ambitious sales target of 40,000 to 50,000 units for this year, a significant leap from the 7,400 units sold last year. Tesla, for comparison, aims to sell 1.8 million units. VinFast also plans to establish a dealer distribution network, unlike Tesla’s direct-to-consumer approach, and is in the process of building a $4 billion production plant in North Carolina, capable of rolling out 150,000 EVs annually.

Investor sentiment, given these factors, remains precarious. While the company’s narrative of rapid growth and lofty ambitions makes for an enthralling tale, the pragmatics of its financial health and product quality could provide a sobering epilogue.

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