World’s hottest stock evokes memories of a $400bn crash

VinFast Auto is unprofitable, thinly traded and exciting individual investors as it rises faster than any other large-cap stock worldwide.

That’s a perilous combination for anyone tempted to bet on further gains in the Vietnamese electric-vehicle startup, which has soared 688% since its debut in a SPAC listing on August 15. VinFast’s $190 billion market capitalisation is now bigger than half of the companies in the Dow Jones Industrial Average, including Goldman Sachs Group and Walt Disney Co.

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% in the span of a few weeks. The money-losing financial services company’s paper value at one point reached over $400 billion, exceeding that of JPMorgan Chase & Co.

AMTD has since tumbled more than 99%, hitting a record low last week. Its valuation now stands at a humble $1.2 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 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% 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 $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 Inc. and AI-darling Nvidia Corp. 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 JSC, a conglomerate spanning homes, hotels, hospitals and shopping malls. The group, together with its affiliates and lenders, have deployed $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% 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 AG and Ford Motor Co. Its net loss reached nearly $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 US regulators and exchanges highlighted in the wake of turbulent new listings including AMTD. Nasdaq Inc. 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 Ken Shih, head of wealth management for Greater China at Saxo Markets. “Investors should be careful of the price volatility.”