What happened
After skyrocketing by more than 108% yesterday, shares of VinFast Auto (VFS -3.35%) are highly volatile after initially plunging back to earth today. The stock dropped 19% in early Wednesday trading, but reversed course to a gain of 11.7% as of 9:53 a.m. ET.
So what
The Vietnamese electric vehicle (EV) company soared more than 68% on its first day of trading publicly on the Nasdaq exchange after going public through a special purpose acquisition company.
The highly volatile trading can be explained by multiple factors. First and foremost, only about 1% of the company's shares were made publicly available to trade. The remaining 99% are controlled by founder Pham Nhat Vuong. The other factor is likely just investor FOMO -- fear of missing out -- on the newest public EV company.
Now what
Even with today's decline, VinFast is still valued much higher than both Ford and General Motors. But investors also might want to compare it just to other EV start-ups.
VinFast only sold about 11,000 vehicles in the first half of 2023. For perspective, Rivian Automotive and China-based Nio delivered about 20,500 and 55,000 vehicles, respectively. Yet VinFast was recently trading at a price-to-sales (P/S) ratio of nearly 150 compared to about Rivian's 6.2 and Nio's 2.4.
The company is planning a factory in North Carolina, with the capacity for 150,000 units per year in its first phase. It is expected to begin production in 2025.
But too many EV investors seem to be chasing too few VinFast shares right now. And that's for a start-up that hasn't yet proved it can operate at the scale needed to be successful. Those looking to speculate on EV stocks should look more at Rivian, Nio, or others before jumping into the hype from VinFast's public debut.
