Vietnam's VinFast became the latest electric-vehicle startup to soar to an outsize valuation after completing a nontraditional stock offering that on paper put it ahead of General Motors and Ford Motor.
VinFast, controlled by the Vietnamese conglomerate Vingroup, surged Tuesday in its opening day on the Nasdaq to a roughly $86 billion valuation -- a rise amplified by the small size of the offering -- before retreating Wednesday.
The stock's rapid rise reflects in part investor enthusiasm for EV startups as well as the limitations of the blank-check company structure through which it was taken public.
The Vietnamese EV maker went public after merging with the special-purpose acquisition company Black Spade, a deal that resulted in $30 million in proceeds for VinFast. The stock, trading under the symbol "VFS," closed Tuesday at around $37 a share, up from Black Spade's last closing price of $10.45.
On Wednesday, shares fell nearly 19% to $30.11, but even with the decline, VinFast was still worth more than its two larger rivals. GM's market value stood at about $45 billion at the close of trading, while Ford's worth was about $47 billion.
"I thought the EV SPAC bubble was over, but I guess not," said David Whiston, an auto- industry analyst at Morningstar. "It makes no sense to me that it'd be worth something approaching BMW and more than GM and Ford."
In a prospectus filed in June ahead of the merger, VinFast said that at a minimum 99.1% of the shares would be owned by entities controlled by Pham Nhat Vuong, chairman of VinFast's parent company in Vietnam.
The company declined to say what exact percentage of shares outstanding are currently publicly traded.
Young auto companies including Rivian Automotive, Lucid, Fisker and Lordstown Motors all garnered billions of dollars from public markets when they listed in the past couple of years.
Investors, eager to discover the next Tesla, piled into the stock of the companies, sending share prices soaring at times to eye-popping highs. Rivian was also at one point worth more than GM.
Since then, the valuations of those companies have plummeted as they faced production delays and missed targets. Lordstown filed for bankruptcy protection in June after the rollout of its first model, an electric pickup, was marred by execution problems and a lack of adequate funding.
Asked about VinFast's current valuation, a Ford spokesman said that the markets are efficient over time and that Ford will create value for shareholders by leading the industry on technology. A GM spokesman said: "The market can't ignore fundamentals forever."
VinFast opened its first U.S. showrooms in 2022 in California and has been moving to expand its operations across the U.S., with plans to spend $2 billion to build an EV factory in North Carolina. The company held a groundbreaking ceremony last month at the factory site and says that production is expected to begin in 2025.
Established in 2017, VinFast started U.S. deliveries in March of an all-electric SUV, called the VF8, which starts at $46,000, and it is taking reservations for a second model, the VF9, also an SUV.
As of now, it is sending vehicles to the U.S. from Vietnam, where it has a factory, and remains a relatively small player in the global car market, delivering 18,700 vehicles through June 30 since starting production in 2021, mostly in its home country. American buyers accounted for 740 of the vehicles purchased during that time, the company said.
The young auto manufacturer has struggled to turn a profit since unveiling its vehicles at the Los Angeles Auto Show in 2021. There are also signs that sales have begun to slow. Revenue from vehicle sales fell by around half to $65 million in the first quarter, according to VinFast's regulatory filings before its public market debut.
VinFast has encountered other obstacles, such as a recall to fix display screens that could go blank while driving, preventing owners from seeing warning lights or control icons.
Withdrawal rates for SPAC deals have skyrocketed in recent years, reducing the number of shares available for trading and leaving newly public companies with less cash than anticipated.
Before SPAC deals are completed, investors in the so-called blank-check company have the opportunity to withdraw their cash if they don't want to hold shares in the public company.
The VinFast deal followed that pattern. Around 84% of Black Spade investors withdrew their money ahead of the merger, a VinFast spokesman said. The high redemption rates resulted in fewer shares available for trading, setting the stage for haywire stock-price moves in which a limited amount of buying and selling swings the price.
VinFast enters an already-crowded field of EV startups and is vying to win market share from traditional automakers that are releasing an onslaught of battery-powered models as the race to catch up with the EV leader, Tesla, intensifies.
The company's debut comes as sales of EVs are showing signs of slowing growth and car companies are starting to lean more on discounts and price cuts to move unsold inventory.
VinFast sought to enter the EV market with a unique business model in which buyers pay one price of the vehicle but then lease the battery for a monthly fee.
The company subsequently withdrew the option in the U.S., but it is in talks with finance companies to bring the leasing program back, said a VinFast spokesman.
Instead, it is selling the whole vehicle, battery included, to car buyers.
"They set out to have battery leasing as a market differentiator, but the feedback from customers was that it was too confusing," said Michael Dunne, chief executive of ZoZoGo, an EV consulting firm.
VinFast knows that it will be tough to break into a crowded U.S. market, he said. "This is a 10-year play for VinFast," Dunne said. "It won't be an overnight success."
Behind VinFast is Vingroup, one of Asia's largest diversified conglomerates and a recognized name in Vietnam, with major holdings in real estate and investments in technology services.
In 2017, VinFast broke ground on a $1.5 billion assembly plant in North Vietnam with the capability of building 250,000 vehicles a year. The company got its start building gasoline-powered vehicles in 2019, including a rebadged version of the Chevy Spark called the Fadil, but has since transitioned to EVs.
Within the past few years, a slew of electric-vehicle startups have gone public, many of them through special-purpose acquisition deals, in which a shell company raises money and lists on an exchange, with the goal of merging with the private firm to take it public.
Other Asian startups, including NIO and XPeng, have also listed in the U.S., with each raising about a $1 billion in initial public offerings.
SPAC merger-deal activity -- frenetic during the pandemic -- has since slowed from a peak in 2021. So far this year, SPAC deal values have totaled roughly $68 billion globally, down more than a half-trillion dollars two years ago, according to Dealogic data.
