Tag: Pham Nhat Vuong

Electric vehicle maker VinFast’s market cap soared to $190 billion on Monday before falling to nearly $81 billion on Thursday. It’s likely worth a tiny fraction of that amount. Here’s why.

Vietnamese billionaire Pham Nhat Vuong made news around the world earlier this month when he took his electric vehicle maker VinFast public through a SPAC deal on the Nasdaq. Soon after its public debut on August 15, Pham’s fortune seemingly jumped by a staggering $39 billion, catapulting him to 16th richest person in the world and Asia’s fifth-richest. Just two days later, the stock tumbled 46%, only to soar once again. By Monday August 28, VinFast had a market capitalization of $190 billion, making it the world’s third-most valuable automaker, behind only Tesla and Toyota. Based on that number, Pham, who was already the country’s richest billionaire and owns about 48% of the company, was worth roughly $90 billion.

Trouble is, that number is totally preposterous. One of the biggest problems with the valuation is that a minute number of shares outstanding are available for trading. Pham controls the rest, 99% according to the SEC filing, through three holding companies, the largest of which is held by his Ho Chi Minh-listed conglomerate Vingroup. (In comparison, Vingroup has a market cap of nearly $10 billion.)

That essentially means there aren’t enough investors to determine a fair market value of the company.

“It’s just a price on a screen, not a consensus verdict from aggregated investors,” says Craig Coben, a managing director at expert witness firm Seda Experts and former global head of equity capital markets at Bank of America. “If a stock has less than one percent free float and the company wants to raise money, investors will likely disregard the share price as a reference point.”

The number of shares available for trading is less than 1% of total outstanding shares, about 1.3 million shares out of 2.3 billion. For context, Tesla has a public float of 2.76 billion shares, or roughly 86% of its shares outstanding; Ford has a float of 3.92 billion shares (around 98%) and General Motors has a 1.37 billion share public float (also 98%).

Not only that, but the way VinFast went public raises some questions. After trying to list its shares in the U.S. since at least March 2022, VinFast ditched its IPO dreams to merge with Macau gambling billionaire Lawrence Ho’s Black Spade Acquisition Co. in a deal that valued VinFast at about $23 billion. The valuation, set before the merger, was calculated by applying the market cap-to-sales multiple of U.S.-based luxury EV Lucid Group to a projected 2023 revenue based on management hitting their goals and then taking an 18% discount to that number.

Coben, for one, is skeptical of that approach, saying the valuation had not “been validated by an independent third party because, according to the filings, there was no fairness opinion issued by a financial advisor.”

When asked why the company didn’t add more comparable companies to determine its pre-listing valuation, Phạm Thị Thanh Hương from Vingroup, its parent company, said “BSAQ [Black Spade] hired Jones Trading as a Financial Advisor and VinFast hired Chardan as a Financial Advisor in the Transaction.”

By July, Black Spade had redeemed over 80% of its shares and by August, 92% of Black Spade’s shareholders had cashed out entirely—the opposite of a vote of confidence. Altogether VinFast, which recently broke ground on a $2 billion new EV manufacturing facility in North Carolina, initially raised only $13.5 million from the SPAC; in fact, its investors had to put up more money to fulfill a minimum cash contribution of $30 million.

When the newly-merged SPAC shares began trading, Forbes initially discounted the value of Pham’s shares by 30% to account for the low float. But after speaking with more than a half dozen equity analysts and three SPAC experts about the transaction and the miniscule float, Forbes recalculated VinFast’s valuation as if it were a private company. In this case, we took the average price to sales multiple of other electric vehicle companies, including Rivian, BYD, GreenPower, Tesla, Nio, XPeng, Lucid and Polestar.

Based on an average of those multiples, Forbes estimates Pham’s stake in VinFast to be worth about $1.6 billion and his total net worth at $6 billion, still enough to rank him as No. 445 richest person in the world on Thursday after markets closed. Meanwhile, VinFast’s shares have tumbled nearly 60% since Monday. Even with that drop, the EV maker has a market capitalization of $80.6 billion, with shares trading at 127 times 2022 revenues.

Pham’s fledgling EV firm continues to face significant competitive hurdles. “[It doesn’t] discount the risk of how VinFast is going to scale in an incredibly crowded marketplace that legacy automakers, who all have the ability to build multiple plants faster than a startup, are no longer ignoring,” says David Whiston, an analyst with Morningstar.

VinFast launched its sales in Vietnam in 2021, and reported $633.8 million in revenue last year. But expansion into the U.S. market has been rocky, exacerbated by poor reviews. Those who tested models like the VF 8 in its initial rollout in the U.S. earlier this year said in auto trade magazine Jalopnik that the car “is simply not ready for America” and were disappointed by results given its $46,000 price tag.

Its first batch of cars sent to the U.S. was recalled in May after the U.S. National Highway Traffic Safety Administration raised concerns about the vehicles’ software. A review filed by a driver in early July with the administration complained of a car shutting down entirely.

Why VinFast would list on the Nasdaq with such a small float is questionable, but likely has to do with optics. Trading on a U.S. stock exchange at a high valuation is a prestigious event and one that gets companies publicity.

So far the hype hasn’t boosted the value of its parent company by much.

“My concern is that a less savvy investor may think this price represents a market signal on valuation and trade on that basis,” says Coben. “For now the share price will be just an object of curiosity, not a measure of value.”

Even with such a tiny public float, Vingroup, the parent company, maintains that its value is determined by the market.

“We believe the market has also recognized VinFast’s potential and commitment to making electric vehicles accessible to everyone, and address supply-demand issues in production,” it told Forbes.