In a whirlwind entry onto the Nasdaq Global Select Market, VinFast Auto Ltd., despite facing a litany of operational issues and unfavorable reviews for its electric vehicles, experienced a staggering surge in its shares price, rallying by an astounding 255%. This meteoric rise propelled the company’s market capitalization beyond industry titans General Motors Co. and Mercedes-Benz Group AG. The unexpected upswing also significantly enriched VinFast’s chairman, Pham Nhat Vuong, whose net worth skyrocketed by an impressive $39 billion to now stand at $44.3 billion, as documented by the Bloomberg Billionaires Index.
VinFast’s trajectory, however, has been characterized by a series of challenges and setbacks. Despite its newly achieved market value, the company faces several operational hurdles, including scathing reviews of its electric cars and the reduction of its US workforce. Such difficulties have overshadowed the progress it has made, including the construction of a factory in North Carolina, which commenced just last month.
One distinctive factor contributing to the company’s volatile stock performance is its concentrated ownership structure. With a substantial 99% stake in VinFast’s outstanding shares under the control of Vietnam’s wealthiest individual, Pham Nhat Vuong, through his conglomerate Vingroup JSC, the liquidity of the stock available for trading is constrained. This ownership configuration renders the stock susceptible to substantial price fluctuations, amplifying the potential for significant market swings.
The initial euphoria surrounding VinFast’s debut aligns with the broader phenomenon of SPAC (Special Purpose Acquisition Company) mergers, a trend that has garnered significant attention and speculative fervor in recent times. Nonetheless, historical data reveal a sobering reality for companies that have undergone the de-SPACing process, with a median decrease of approximately 45% in market value. A notable 18 instances out of these experienced a staggering decline of over 70%, illustrating the unpredictable nature of these post-merger trajectories.
VinFast’s performance post-SPAC is poised to serve as a litmus test for the future of such deals. The company’s unprecedented surge, if sustained, could set it apart from a slew of electric vehicle manufacturers that went public via SPAC mergers, only to see their valuations plummet. High-profile instances such as Lordstown Motors Corp., Nikola Corp., and Faraday Future Intelligent Electric Inc. underscore the inherent volatility and risk associated with such market maneuvers.
VinFast’s management remains undeterred by its tumultuous market reception. The company, which has embarked on establishing a manufacturing presence in the United States, holds an optimistic sales forecast of 45,000 to 50,000 units for the current year. Chairman Pham Nhat Vuong, displaying unwavering confidence, predicts that the company will achieve break-even status by the close of 2024.
The prevailing uncertainty surrounding VinFast’s long-term performance and the implications for other SPAC-driven ventures underscores the broader sentiment surrounding these deals. The surge in shares of VinFast Auto serves as the latest case in point, illustrating both the potential for immediate gains and the inherent risks of such an approach.
In an era marked by a dynamic and evolving automotive landscape, VinFast’s journey typifies the intricate dance between market speculation, operational execution, and long-term viability. As the market watches with bated breath, the fate of VinFast could signal the direction of future SPAC mergers and their lasting impact on the ever-evolving realm of electric vehicles and the broader automotive industry. Time will be the ultimate arbiter, determining whether the surge of VinFast Auto represents a mere flash in the pan or the emergence of a true industry contender.
Source: Bloomberg
