Pham Nhat Vuong, chairman of Vingroup JSC, attends the loading ceremony of VinFast LLC’s VF8 … [+]
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 owns 99% of the company, was worth $188 billion.
Trouble is, that number is totally preposterous. One of the biggest problems with the valuation is the fact that a mere 1% of shares outstanding are available for trading. Pham controls the rest through three holding companies, the largest of which is held by his Ho Chi Minh-listed conglomerate Vingroup. (In comparison, Vingroup is worth $2.6 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 1% in shares available for trading amounts to less than 25 million shares. 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 is questionable. 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 number was calculated by applying the multiple of U.S.-based luxury EV Lucid Group to a projected 2023 revenue based on management hitting their goals.
That $23 billion valuation has some issues, however. “ [It] has not been validated by the market,” says Coben. “Nor has it been validated by an independent third party because according to the filings, there was no fairness opinion issued by a financial advisor.”
By July, Black Spade had decided to redeem over 80% of its shares and by August, 92% of Black Spade’s shareholders had cashed out entirely. Altogether VinFast, which broke ground on a reported $2 billion new EV manufacturing facility in North Carolina, raised only $169 million from the SPAC.
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 about the unusual transaction, Forbes has decided to recalculate 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 everyone from Lucid to Asian upstart Nio to industry leader Tesla.
Based on those multiples, Forbes estimates Pham’s stake in VinFast at about $2.3 billion and his total net worth at $6.9 billion. That knocks him down to Earth and ranks him at No. 359 in the world.
We’re not the only ones to think the valuation is too high. The stock fell roughly 45% Tuesday. Still even with that tumble, the market is still valuing it at more than $100 billion, more than 40 times our estimate.
Pham’s fledgling EV firm faces 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 million 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. The company has not yet responded to a request for comment.
“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.”