VinFast’s eye-popping rally snaps, evoking memory of AMTD’s $540 billion crash

Singapore - VinFast Auto is unprofitable, thinly traded and was grabbing attention from individual investors as it rose faster than any other large-cap stock worldwide.

That was already a perilous combination for anyone tempted to bet on further gains in the Vietnamese electric vehicle start-up, which soared 688 per cent

since its debut in a Spac listing on Aug 15,

through Monday’s close. As if on cue, the rally was halted sharply on Tuesday as the shares snapped their six-day winning streak to close down 44 per cent, wiping off US$83 billion (S$112 billion) from the company’s valuation.

Despite the wipeout, VinFast’s nearly US$107 billion market capitalisation still makes it larger than companies like BlackRock and FedEx.

The last time a stock with a tiny free float rose from relative obscurity to the ranks of the world’s largest companies, it didn’t end well for investors. AMTD Digital, another US-listed company with roots in Asia, baffled market veterans a year ago by soaring more than 32,000 per cent in the span of a few weeks. The money-losing financial services company’s paper value at one point reached over US$400 billion (S$540 billion), exceeding that of JPMorgan Chase & Co.

AMTD has since tumbled more than 99 per cent, hitting a record low last week. Its valuation now stands at a humble US$1.1 billion.

While VinFast and AMTD differ in key respects, their tiny free floats and appeal to momentum-chasing retail investors have made both vulnerable to extreme booms and busts.

“VinFast’s current valuations are unsustainable,” said Mr David Blennerhassett, an analyst who publishes on the Smartkarma platform. “And because there are so few VinFast shares available, anyone who buys, say 50,000 shares, will move the stock.”

After jumping an eye-popping 255 per cent on its first day of trading, VinFast looked as if it had lost momentum with a three-day slide. Yet the rally has since gathered pace, vaulting its market value to near US$200 billion in just 10 trading days. If that milestone is reached in the coming days, that will compare to the years it took for electric-vehicle bellwether Tesla and AI-darling Nvidia to exceed that level – though VinFast could tumble just as fast.

While the wild ride is raising eyebrows across Wall Street, supporters of VinFast have a case to make.

It’s one of Vietnam’s most high-profile companies, backed by the country’s wealthiest man Pham Nhat Vuong – who has established Vingroup, a conglomerate spanning homes, hotels, hospitals and shopping malls. The group, together with its affiliates and lenders, have deployed US$8.2 billion to fund VinFast’s operating expenses and capital expenditures the last six years.

That sets it apart somewhat from AMTD, a Hong Kong-based financial services firm that’s little-known even in its home market.

And because Vinfast is hard to short, its rally could go on for a while. Less than 1 per cent of its shares are available for trading, making it expensive for short sellers to borrow.

Loss making

Still, VinFast’s surge is hard to justify on fundamentals alone. The automaker sold just 24,000 cars globally in 2022, a tiny fraction of the deliveries made by Volkswagen and Ford Motor. Its net loss reached nearly US$600 million in the first quarter of this year and is expected to widen in the near term as the EV maker scales vehicle production.

Whether or not the rally ends, it’s a reminder of the risks in thinly traded stocks that United States regulators and exchanges highlighted in the wake of turbulent new listings including AMTD. Nasdaq said it’s stepping up scrutiny of initial public offerings by small-cap companies, Bloomberg reported in September. Securities and Exchange Commission chair Gary Gensler said last year that the agency is well-positioned to delve into the causes of unusual moves.

“There are similarities between the meteoric rise of VinFast and AMTD Digital given their small free float and meme stock angle,” said Mr Ken Shih, head of wealth management for Greater China at Saxo Markets. “Investors should be careful of the price volatility.” BLOOMBERG