VinFast Auto Warrants (NASDAQ: VFSWW) could be said to be worth $57 each at present, Which, given that VFSWW is currently trading at $4.55 could be said to be something of a bargain. However, we’d very strongly suggest that this is not the correct way to value these warrants. Very, very, strongly. We do think that some will try to do so and this is not a recommendation that more do. It’s an explanation of why that could well turn out to be a widowmaker trade.
We’ve talked before of VinFast Auto: “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.”
That the warrant price is $4,50 not $45 or $57 is because the assumption is that the market’s not going to stay that irrational for two years.
VinFast Auto stock price from Google Finance.
VinFast Auto Warrants price from Google Finance.
The warrants at VinFast have an exercise price of $11.50. So, in one reading of the price we get $68.77 minus $11,50 gives us $57 and change. That’s what the warrants should trade at then to be on the money. And if they were an option (or warrant) exercisable at will then that’s what they would be trading at, Or about, at least. As they are in fact exercisable in two years time then what the warrants are tracking is what people think the VinFast Auto price will be in two years time. Which is not the same thing as the price today, obviously.
Now, it is possible that we’ve got this wrong and that the warrants are exercisable right now. If they are then there’s free money right there - buy warrants convert and sell. But SPAC warrants don’t really work that way. The real point we’re making here is that SPAC - and therefore VinFast Auto - warrants have a complicated pricing structure and it’s just not valid to look at how far in or out of the money they are.
