VinFast Auto Making Waves in the EV Market

Vietnamese electric vehicle (EV) manufacturer VinFast Auto has quickly emerged as a major player in the industry since its establishment in 2017. Despite only selling a few vehicles, the company has skyrocketed in value and is now considered one of the world's most valuable automakers.

Impressive Performance but Caution Advised

Aggressive investors contemplating shorting VinFast's stock should exercise caution. While the stock's price experienced a significant decline of nearly 15% to $25.69 during midday trading on Thursday, it had previously surged an astonishing 255% on Tuesday—the first day of trading for VinFast shares on the Nasdaq exchange. This unprecedented growth led to a subsequent drop of approximately 19% on Wednesday.

Phenomenal Valuation

With a current market capitalization of around $60 billion, VinFast surpasses the market value of both Ford Motor (F) and General Motors (GM). Its valuation even exceeds that of all U.S. EV start-ups combined, firmly establishing it as a force to be reckoned with in the global automotive market.

Impressive Sales and Expansion Capacity

In the first half of 2023, VinFast sold approximately 11,300 EVs, a testament to the demand for its products. Furthermore, the company boasts a manufacturing capacity of approximately 300,000 EVs per year. However, despite these achievements, VinFast is not yet profitable and requires additional capital for business expansion. During the first quarter alone, the company utilized over $1 billion in cash.

VinFast's remarkable ascent highlights its potential as a key player in the EV industry. While caution is warranted given its recent volatile performance, the company's impressive sales figures and expansion capacity position it for future success.

VinFast Stock: Potential for a Short Squeeze

Short sellers have set their sights on VinFast stock, with approximately 1.2 million shares sold short, according to Ihor Dusaniwsky, the managing director at short-selling research firm S3 Partners. Although this only represents 0.05% of the total outstanding shares, the significance lies in the fact that it accounts for roughly 6% of the 17-21 million shares issued during the company's merger with Diamond Spade Acquisition, a SPAC. It should be noted that not all of these shares are currently being traded, as some are held by SPAC insiders.

The aforementioned figures indicate the potential for a short squeeze scenario in VinFast stock. A short squeeze occurs when short sellers are compelled to cover their positions simultaneously, leading to a rapid surge in stock prices due to a scarcity of available shares.

In the short term, supply and demand dynamics play a crucial role in determining stock prices, much like how earnings and cash flow impact them over the long run.

While it remains uncertain how successful VinFast will be in the future, caution is advised for bearish investors given the current surprising valuation. It would be prudent to wait until more stock becomes available for trading.