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November 2023
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November 2023
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Analysis: VinFast listing fiasco questions sustainability of betting on carbon transition

NASDAQ listing
By Paul Mackintosh   
August 23, 2023

Inflation? Volatility? Global geopolitical tensions? Forget about all those downers as long as there's fat money to be made. Take for example the NASDAQ listing of Vietnamese electric vehicle manufacturer VinFast. Shares in the pre-profit business debuted on Tuesday 15 August at around US$22, to reach above $37 in their first day, a figure which saw VinFast briefly valuedat $85 billion, almost double Ford's $48 billion and General Motors’ $46 billion. Yes, a company which has never made a profit, from a country with the 34th highest global GDP and a population less than a third that of the US, was briefly valued almost twice as high as the US auto giants that practically created the modern auto industry.

Unfortunately for those left holding VinFast shares, reality caught up faster than a speeding EV. By Thursday 17 August, VinFast’s shares had slumped to below their offer price, and were trading at just under $20, cutting its valuation to around $46 billion, and shedding almost $40 billion of market cap in just two days.

So what do we know and how did it happen? VinFast went public through a reverse merger with a special purpose acquisition company or SPAC, which financial markets veterans may remember were popular during the last speculative bubble, way back in 2021. The fact that this SPAC, Black Spade Acquisition, was founded and sponsored by Hong Kong casinos magnate Lawrence Ho may have had something to do with the outcome. It’s clear, anyway, that some speculators were still sweet on SPACs. Plus, VinFast’s founder, Pham Nhat Vuong, apparently still owns some 99% of the company after some 90% of the SPAC shareholders earlier opted to redeem their units – partly explaining the frenzy among investors to snap up the limited outstanding float of some 0.07% of shares.

Furthermore, despite all the conservative climate change denialism, it's obvious that big money is betting on the carbon transition and the future of electric vehicles. Less hopeful is the obvious conclusion that, despite all the handwringing over stock market corrections and inflated VC valuations, absurd amounts of money are still ready to make ludicrous bets where they see an upside. Plus, VinFast also apparently benefited from the US pivot away from China, with bets being placed on other growing markets in Asia. A headline from The Diplomat back in June, “How Vietnam Can Disrupt China’s Dominance in EVs”, encapsulates the thesis.

Finally, it’s obvious that short-term wilful blindness and senseless greed still rule in the financial markets. All the headlines and commentator statements about VinFast being “grossly overvalued” are only coming out now, after the slump has set in. They weren’t so evident in the coverage leading up to its debut. Amid an IPO drought, investors may have been over-eager to jump on the first flotation that came along. They’ve certainly done a great job in illustrating why everyone else should motor, pedal, gallop or run away from the next one.