Watching the trading of Vietnamese EV start-up VinFast Auto is a fascinating experience, providing valuable lessons in the stock market. From the moment the company merged with a special-purpose acquisition company and changed its stock symbol to “VFS,” VinFast stock has displayed incredible volatility, with significant swings up or down.
Daily Moves and Coin Flips
On Wednesday, VinFast stock experienced its second consecutive daily decline, dropping 11% to close at $41.27. However, this 11% move can be considered modest when compared to the average swing of 50% over the past twelve trading days. It’s important to recognize that each day’s movement is almost like a coin flip. VinFast stock has risen in value seven times and fallen five times since the SPAC merger was approved, resulting in increased volatility. Looking at the overall picture, there have been a total of eight rises and seven falls.
The Power of Volatility
Volatility breeds more volatility. When a stock experiences significant jumps or declines, it often triggers subsequent big moves, reminiscent of aftershocks following an earthquake. Rarely do investors collectively push a stock up by 255% in a single day, only to conclude that it’s perfectly valued.
Understanding Intrinsic Value
Lesson three involves understanding the concept of value. The market doesn’t always accurately reflect the intrinsic value of an individual business. In the case of VinFast, the SPAC merger valued the company at approximately $23 billion, surpassing the market capitalization of Rivian Automotive – a company that delivers more cars than VinFast. Although $23 billion seems high, it aligns with the valuation of other EV start-ups. At its peak price of $93 per share, VinFast’s market value approached $215 billion, bringing it closer to Toyota Motor than Rivian.
In conclusion, observing the volatility of VinFast stock provides valuable insights into the stock market. It highlights the unpredictable nature of daily movements, the cascading effects of volatility, and the importance of assessing intrinsic value in relation to market perception.
VinFast Emerges as a Global Player in the Automotive Industry
VinFast, Vietnam’s very own automobile manufacturer, has made waves in the market with its recent move. With a market capitalization of approximately $96 billion, VinFast now stands as the world’s fourth-most valuable automaker, surpassing renowned brands like Porsche (P911. Germany). Only Tesla (TSLA) and Toyota (TM) claim the top two spots. China’s BYD (1211. Hong Kong) closely trails VinFast based on data from FactSet. Interestingly, the combined value of Ford Motor (F) and General Motors (GM) shares amounts to roughly $94 billion, positioning VinFast ahead.
A New Perspective on Market Rationality
While VinFast’s impressive market capitalization indicates its success, there are other metrics to consider for a comprehensive assessment of market rationality. Vingroup (VIC. Vietnam), the parent company of VinFast, holds nearly 1.2 billion shares of VinFast stock, valued at around $50 billion. However, Vingroup’s market capitalization stands at only $9 billion. This contrast suggests that there may be an arbitrage opportunity in Vingroup stock or a general skepticism surrounding the perceived value of VinFast.
Volatility Reigns: A Magnet for Traders
Volatility often proves to be a magnet for traders, and VinFast is no exception. Within the past 12 days alone, over 100 million VinFast shares have been traded. Considering that insiders hold approximately 17 million to 20 million shares, the average holding period for VinFast stock has been less than two days. This volatile trading pattern attracts traders looking to capitalize on short-term fluctuations.
The Decisive Role of Cash Flow and Earnings
In the long run, the worth of any stock, including VinFast, is inevitably determined by cash flow and earnings. It is crucial for investors to bear this in mind as they make decisions based on the market’s current enthusiasm for VinFast.
