To The Moon

The electric vehicle (EV) industry is undeniably one of the most promising sectors in today's market, with companies racing to secure their place in the future of transportation. Amidst this fervor, $VinFast Auto(VFS)$, a Vietnamese electric automaker, made a grand entrance onto the Nasdaq, sending shockwaves through the financial world. However, as the dust settles, concerns emerge about the company's rapid rise and the potential dangers that lie beneath.

VinFast began trading on the Nasdaq Tuesday.

VinFast's debut was nothing short of spectacular. The company surged an astounding 255% on a trading day, capturing attention and amassing a market capitalization that momentarily surpassed established giants like $General Motors(GM)$. However, the excitement proved to be short-lived. In just a matter of days, VinFast's stock plunged dramatically, shedding over half of its value from the debut's peak.

A Rollercoaster Ride

A significant factor contributing to VinFast's extreme volatility is the company's ownership structure. Founder Pham Nhat Vuong controls a staggering 99% of the company's stock, leaving only a fraction available for public trading. This means even small trades can trigger substantial price swings, turning the stock into a playground for speculation and uncertainty.

Founder's Control and Limited Float

VinFast's ambitious plans to sell 50,000 electric vehicles this year while navigating the global EV market raise eyebrows. The company's struggle to retain senior executives and its shifting sales strategy signal potential operational challenges. Additionally, its shift to a "hybrid model" for sales, involving distributors and dealers, may face hurdles, especially as it attempts to penetrate more mature markets like the United States.

Cash Burning and Market Realities

VinFast's valuation, once soaring at $85 billion during its debut, has now plummeted to $35 billion. The company's intention to raise capital from global investors in the next 18 months could further jeopardize its lofty valuation. As investor sentiment shifts and the market becomes more skeptical, the ability to secure funding at favorable terms may be compromised.

VFS Day Chart

Founder Pham Nhat Vuong's decision to bring VinFast to the public markets indicates a potential intention to monetize his stake over time. This prospect could loom over the stock and impact its performance as investors grapple with uncertainties about the founder's intentions and their potential implications.

While VinFast's journey has been a rollercoaster ride, it's important to acknowledge the dangers inherent in such extreme volatility. The company's unique ownership structure, rapid valuation shifts, and operational challenges paint a picture of a risky investment landscape. As the EV industry continues to evolve, investors must exercise caution, conduct thorough due diligence, and remain vigilant against potential pitfalls.

The VinFast story serves as a reminder that even in the midst of innovation and potential, careful consideration of risk and market realities is essential to navigate the treacherous waters of emerging industries.

While the allure of EVs and their potential to shape the future of transportation is undeniable, personally I have decided to let it pass and look for better opportunities in the EV industry, like other automobile manufacturers such as $Tesla Motors(TSLA)$, $NIO Inc.(NIO)$ and $XPeng Inc.(XPEV)$.

Disclaimer: The information provided in this post is for informational purposes only and should not be considered as financial advice. Investment is subject to significant risk, including the potential loss of capital. Investors should conduct their own research before making investment decisions. [Observation]

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