Volatility and Valuation of VinFast Auto

by Warren Seah

Investors who find the volatility and valuation of stock in the EV start-up VinFast Auto too challenging may want to consider exploring the option of warrants.

VinFast recently merged with a special-purpose acquisition company and is now traded on the public market under the symbol VFS, commencing from Aug. 15. Since then, the trading has been extremely unpredictable, with an average daily move of 45% in either direction. Notably, there were two days with triple-digit gains and one day experiencing a loss of almost 50%.

On Friday, shares descended by 17% to $28.80, while the S&P 500 saw a marginal increase of 0.3%. The Nasdaq Composite remained unchanged.

This decline signifies the stock’s fourth consecutive loss consecutively following six consecutive gains. Initially priced at $15.40, shares skyrocketed to a high of $93 on Monday during that ten-session run.

For those interested, publicly traded warrants on VinFast stock grant holders the opportunity to acquire a share of VinFast stock at $11.50. The exercise period for these warrants commences on Sept. 13, which is less than two weeks away.

Trading under the symbol VFSWW, these warrants are currently valued at approximately $5.74 per share. In theory, holders of these warrants will be able to buy a share of VinFast for $11.50 and sell it for around $28.80, thereby generating a profit of $11.56.

However, it is important to note that prices are likely to fluctuate leading up to the exercise date of these warrants.

VinFast Stock: The Potential for Profit

Traders seeking to exploit the potential profit from VinFast stock have a few strategies at their disposal. One approach involves purchasing a warrant and simultaneously selling the VinFast share short. This tactic allows traders to lock in potential profits and mitigate the risk of price fluctuations. With the sale fetching approximately $28 and the warrant priced at around $5.74, executing this maneuver appears promising. However, there is a hurdle to overcome – short-selling VinFast stock proves to be a challenging task.

Borrowing VinFast shares for short-selling is hindered by limited availability. Leading short-selling research firm S3 Partners reveals that borrowing a share incurs an annual cost amounting to 350% of the stock price. Consequently, the profit margin diminishes significantly. Assuming the short sale lasted only a couple of weeks, the payment required would equate to approximately $2 per share, effectively reducing the profit to $9.56.

Undoubtedly, the potential arbitrage profit suggests that apprehension permeates among traders regarding holding VinFast stock until the warrants can be exercised on September 13th. If the shares were more stable, the allure of arbitrage profit would be irresistible.

Examining VinFast’s current situation offers insight into the likelihood of stock movement. Valued at approximately $28.80 per share, VinFast’s total worth exceeds a staggering $65 billion. This valuation surpasses that of renowned automakers such as General Motors (GM), Ford Motor (F), and Stellantis (STLA). Furthermore, VinFast’s market capitalization is triple that of Rivian Automotive (RIVN).

Despite experiencing a 70% decline from its Monday intraday high of $93, VinFast’s market cap secures a prominent position within the top 10 global automakers.

In conclusion, the potential for profit in VinFast stock captivates traders with its allure. However, the challenges associated with short-selling and the anticipation of stock movement warrant careful consideration. As the market eagerly awaits the exercise of warrants on September 13th, VinFast’s future trajectory remains uncertain.

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