To say VinFast Auto (NASDAQ: VFS) stock has been volatile since it began trading publicly two weeks ago is an understatement. Shares of the newly public Vietnamese electric vehicle (EV) company soared more than 250% when it began trading on Aug. 15.
The stock has swung wildly ever since. As of early Friday trading, shares have been more than cut in half this week since last Friday’s close, according to data provided by S&P Global Market Intelligence. And that was after it popped more than 20% as it began trading on Monday morning.
Traders had pushed VinFast’s valuation beyond what makes any fundamental sense after its public debut. The nearly $200 billion market cap the company achieved at its peak this week likely wasn’t the result of investor excitement about its business prospects, though.
While the company has plans to build a new factory in North Carolina that is due to begin production in 2025, it sold only 24,000 cars globally in 2022. It reported a loss of more than $2 billion last year on revenue of $634 million.
Yet the stock was soaring from a frenzy of too many traders chasing too few shares. In a rather complex arrangement, VinFast only made 1% of its shares publicly available, while the remaining 99% remain controlled by the company’s founder, Pham Nhat Vuong.
About half of VinFast’s 2.3 billion total shares outstanding are held by Vietnamese conglomerate Vingroup. Vuong also founded Vingroup and owns 51% of that company either directly or through Vietnam Investment Group. Much of the other half of VinFast shares are owned by Vuong through other entities he controls.
Legendary investor Warren Buffett — who turned 93 just this week — has long recommended that investors keep it as simple as possible. He famously avoided high-flying technology stocks when he didn’t understand their seemingly irrational market moves in the late 1990s. That helped him ride out the dot-com bust in a better position than many others. Investors would be better off following Buffett’s investing advice and avoiding participating in the irrational trading seen with the latest EV entry into the stock market this week.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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