Huge valuation for Vietnamese maker of electric car with awful reviews makes no sense

Until recently, most investors had never heard of Vietnamese electric car maker VinFast. That changed after last week’s initial public offering (IPO), when the Nasdaq-listed company briefly became the fifth-most valuable car firm in the world.

Shares almost quadrupled last Tuesday, valuing the company at $85 billion – almost as much as the combined market capitalisation of Ford and General Motors.

This makes no sense.

Sales have been slow for the money-losing company, with S&P Global Mobility saying only 137 cars were sold in the US through June. Reviews for the cars have been awful. This might seem like some crazed bubble, another example of deluded investors losing the run of themselves over the latest EV stock. However, that’s not actually the case right now. Rather, almost all the shares are locked away, as billionaire owner Pham Nhat Vuong owns roughly 99 per cent of the company.

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This is a low-float company so trading was thin last Tuesday, with only $185 million in shares changing hands. In a proper market, VinFast shares would never have hit last week’s heights. Thin trading means its market capitalisation should be taken with a pinch of salt.