VinFast's Potential Crash Could Drag Down Tesla And Rivian, Worries Analyst — And Jim Cramer Adds To Anxiety

Zinger Key Points
  • VinFast's market cap at the end of Wednesday’s session is roughly $73 billion, notably higher than GM, Ford and Rivian.
  • Cramer warns that the stock is worth only under $3 and Gary Black also sees a near-term collapse in the stock.

Vietnamese electric vehicle startup VinFast Auto Ltd.'s VFS stock was listed on the Nasdaq this week following a SPAC deal. The strong run-up in the debut session raised many eyebrows, as the rally gave the company a market capitalization more than legacy automakers General Motors Corp. GM and Ford Motor Co. F.

What Happened: VinFast stock closed Tuesday's session at $37.06, giving the company a valuation of over $85 billion. The stock pulled back by about 18.75% on Wednesday before settling at $30.11, according to Benzinga Pro data.

Commenting on the irrational exuberance, Gary Black, Managing Partner at Future Fund, said, "I worry that when $VFS stock price collapses – it can't be worth more than $GM or $F or $TSLA."

The fund manager also sees another downside to this. “With product reviews that are literally horrible — it drags down quality EV companies like $RIVN and maybe even $TSLA with it,” he said.

Cramer also shared a similar sentiment. Although the company produced 3,000 EVs, only 150 are registered, suggesting that their sales ratio is not all that good, he said on CNBC Squawk On The Street.

“This is one of those blank-check mergers and no one knows how many shares are being redeemed right now,” Cramer said. It's a complete fiasco, he added.

The stock probably is worth $2.60. “Go ahead and buy it. You’ll lose money," he warned.

See Also: Best Electric Vehicle Stocks

Why It's Important: Based on VinFast's outstanding shares of 2.42 billion, the company's market cap at the end of Wednesday's session is roughly $73 billion. This compares to GM's market cap of $45.62 billion and Ford's $47.25 billion.

Rivian Automotive, Inc. RIVN, which is emerging as a serious contender to Tesla in the EV race, has a more modest market cap of $20.7 billion.

Market leader Tesla, Inc. TSLA is far ahead and despite the recent pullback, the stock boasts a market cap of $715.04 billion.

The post-IPO surge, however, is not unusual. Lucid Group, Inc. LCID, which also embarked on its IPO journey through a SPAC, reached a peak post-IPO value of $57.75 in November 2021. Presently, the stock stands as a mere shadow of its former self, trading at approximately $6.

For VinFast, maintaining its lofty valuation presents a formidable challenge. The EV market is navigating a challenging phase, with demand displaying tepidness and manufacturers responding by implementing aggressive price reductions.

While established industry participants can afford to slash prices without incurring significant margin repercussions, newcomers, who are yet to achieve profitability, may find themselves on a prolonged path to financial success. This scenario is likely to exert strain on their available funds and subsequently impact their viability as a sustainable entity.

Read Next: Vietnamese EV Maker VinFast Wraps Up SPAC Merger, Ready For Nasdaq Debut On Aug 15

Photo by PhatTai on Shutterstock

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Posted In: Analyst ColorAsiaEquitiesNewsShort IdeasTop StoriesTrading Ideaselectric vehicleseurasaiaEVsExpert IdeasFuture FundGary BlackmobilityJim Cramer
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