VinFast Auto (NASDAQ: VFS) stock is up 108% on the day. VFS stock is not, objectively, worth 108% more than it was yesterday. Sure, prices in markets are prices in markets so we can’t complain that it’s not a real price. But it is an odd one. One that has a great deal more to do with technical features of this market right here and right now than the value of an EV car maker in Vietnam. The important point to grasp being that technical matters can, will, influence prices in the short term but objectivity always does win out in the medium to long term.
As we said about the IPO of VinFast: “It’s also possible to approach this another way, which is to look at the shareholding structure: “VinFast’s billionaire founder Pham Nhat Vuong owns about 99 per cent of its shares, leaving only a small amount available for trading. Only 1.3mn shares of the Spac were able to be traded after earlier redemptions and just $185mn in shares changed hands, according to analysts.” Ah. So while we’ve that heady $85 billion valuation we’ve really only got modest trade in an extremely limited float - that 1% of total valuation being on the market.
We would very strongly suggest that this price is going to turn. The problem is, of course, knowing when it’s going to turn. We’d insist that this price is irrational. But as JM Keynes pointed out, the market can remain irrational longer than you can remain liquid.”
We’d note that the price was some $35 when we said that. VinFast stock then dropped back to a very much more reasonable $15 and $13 range two days later.
VinFast Auto stock price from Google Finance
That issue discussed there, that there’s only 1% of the equity actually quoted, is one reason for the extreme volatility here. It only takes a small change in sentiment to move a stock price massively when there’s a tiny, tiny, float. The other issue is that it’s very difficult to short a stock immediately after an IPO. It is legal to do so but you’ve got to be able to find the borrow. And the underwriters aren’t allowed to lend to shorts for the first 30 days. So we’re without the influence on the price of those who think this is grossly over-valued. Remember what Robert Shiller got his Nobel for - the market’s only complete when people can short it.
We’re not the only people who think that the VinFast price makes no sense. Really we’re not.
The only issue which really divides observers is when, not if, is it doing to return to a more realistic valuation?
