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SINGAPORE, Aug 16 (Reuters Breakingviews) - Pride comes before a fall, and that is the chastening road Vietnam’s richest man Pham Nhat Vuong has steered his six-year-old electric vehicle maker onto with its U.S. listing.
VinFast (VFS.O) shares leapt 270% on Tuesday following the group’s $27 billion merger with a special purpose acquisition company (SPAC). It catapults the enterprise’s value to $90 billion, a grand outcome only possible because Vuong and related entities still own 99% of the Tesla (TSLA.O) wannabe. Unlike Grab’s (GRAB.O) $40 billion SPAC deal two years ago when the Southeast Asian ride hailing-to-food delivery firm amassed $4.5 billion from global investors, the latest listing was not a fundraising event. And it leaves the tycoon at the helm of the wider property to retail conglomerate Vingroup (VIC.HM) awkwardly parked for his next move.
The pop values the unprofitable Vietnamese company at 142 times its sales in 2022, some 16 times Tesla’s multiple. That valuation falls to 58 times if VinFast can grow its topline at 145% this year, the same pace analysts forecast for U.S. rival Rivian (RIVN.O) whom VinFast identifies as a peer alongside Elon Musk’s marque. But such rapid growth looks a stretch; VinFast’s topline shrunk 7% last year and sales plunged in the first quarter of 2023 after the company phased out producing gasoline-powered vehicles, and competitors are slashing prices.
The company will now work through that challenge and its existing operational problems in the full glare of the U.S. stock market. VinFast has pushed back plans to operate its $4 billion plant in North Carolina by a year to 2025. The project is yet to win hoped-for tax breaks and reviews of its cars are not inspiring. Only 137 VinFast EVs were registered in the U.S. this year through June, per S&P Global Mobility.
Ultimately, VinFast is heavily reliant on Vuong who is betting big on electric vehicles. He has poured $9.3 billion into the company through Vingroup and other investment vehicles after shuttering a mobile handset venture, scrapping an airlines project and disposing of Vingroup’s convenience stores. But there is at least no urgent need for capital: VinFast CFO David Mansfield told Reuters Breakingviews that the firm is in talks with investors including sovereign wealth funds and is likely to finalise a fundraising within 18 months. VinFast can delay any embarrassment from a hard reset of its valuation, but it can’t avoid it entirely.
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refiles to add additional code.)
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CONTEXT NEWS
Shares in electric-vehicle maker VinFast surged 270% to $37 in their Nasdaq debut on Aug. 15 following the company’s merger with blank-cheque firm Black Spade Acquisition.
The merger gave VinFast an enterprise value of $27 billion, the two companies said. VinFast's current shareholders – essentially parent Vingroup, and through investment vehicles, its founder Pham Nhat Vuong – continue to own 99% of the combined firm.
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