VinFast Stock Is Dropping. The EV Maker’s Shares Are Too Expensive.

VinFast is also worth more than all U.S. EV start-ups combined, worth more than profitable EV start-up

Li Auto

(LI), and when including debt and cash, worth more than Chinese EV leader

BYD

(1211.Hong Kong).

It’s a lot.

There’s a lot to like about VinFast. It has the capacity to build about 300,000 EVs and is building another plant in North Carolina. It has sales, selling 11,300 EVs in the first half of 2023. It has a strong backer in Vietnam’s VinGroup. It has multiple EV models and has already entered the U.S. market selling 850 VF8 electric SUVs in California in the first half of 2023. CEO VinFast CEO Thuy Le says VinFast will roll out sales in the rest of the U.S. soon.

Still, $86 billion? There aren’t any Wall Street estimates to look at yet. No one covers the stock just yet. It typically takes a few weeks for analysts to ramp up coverage of a new stock. It typically takes the Street a little longer when a company raises money via a SPAC merger, like VinFast did, versus when a company raises money in a traditional IPO.

Investors, for a while, will be left to evaluate numbers on their own. Including debt and cash, VinFast is valued at roughly $4.4 million per annualized car sold. Based on the capacity to produce, VinFast is valued at about $300,000 per car. The numbers for

Rivian Automotive

(RIVN) are about $275,000 and $93,000 respectively–fractions of the VinFast amount.

VinFast is also valued at about 47 times estimated 2023 sales.

Tesla

(TSLA) trades for about 8.3 times. Li trades for about 2.6 times.

Any numbers looked at will make VinFast look expensive. Its SPAC merger valued the company, including cash and debt, at about $27 billion. Why shares shot up is hard to say. A small fraction of shares is available to trade, just millions out of 2.3 billion shares outstanding. Limited stock supply can lead to funny things. The better answer is likely that the stock started going up so traders piled in.

Where it will go from here is hard to say, but it will be lower eventually. Not because of anything the company did, but because of what the market did.

There will be reasons it falls. VinFast isn’t profitable yet and used more than $1 billion to build its business in the first quarter of 2023. How much cash it has today is hard to say, but based on recent SEC filings, the answer is less than $1 billion. (Investors will start to get regular financial updates from the company now that its stock is publicly traded.) More capital will be needed, from VinGroup or from public investors. That means more shares get issued, diluting the ownership stake of existing shareholders.

Shares will also fall because the initial euphoria will fade. When that happens is tough to say. The market can be enigmatic.

The stock fell about 17% to $30.85 in premarket trading.

S&P 500

and

Nasdaq Composite

futures are down 0.1%.