Short-selling legend Jim Chanos had a few words for VinFast Auto, an automotive wunderkind from Vietnam, shortly after the stock fell more than 40% in Tuesday’s trading session.
The speculator who made a fortune shorting Enron before it went bust came hours after calling the electric car upstart a “$200 billion meme stock.”
“Retail investors are buying stocks that options traders think are going to drop 50% in the next three weeks,” he said. tweet On Musk’s rebranded X website, citing implied prices based on put options expiring on September 15the th.
It’s unclear whether Chanos is suggesting he himself will be shorting VinFast the way EV rival Tesla is, but investors will follow the Wall Street veteran’s trade advice.
Either way, VinFast’s shares have since plummeted.
Chanos could not immediately be reached for comment, while a representative for VinFast did not respond. wealth for comment.
The Vietnamese automaker’s debut as a public company is a bit of a fairytale for the startup.
The company eschewed the traditional and more rigorous initial public offering (IPO), going public earlier this month through a special purpose acquisition company (SPAC).
Within a few days, already Covering almost the entire automotive industry in market value.
if $VFS (Vinfast) are lucky they will be producing 40,000 units this year. Toyota will produce 40,000 vehicles in the next 40 hours.
Market cap, $200B.
One has to be curious when things play out like this. about everything.
— Drew Dixon (@AlbertBridgeCap) August 28, 2023
Even though VinFast is only a six-year-old automaker, it has sold just 18,700 electric vehicles so far, and that comes from a country that produced half as many cars as Morocco last year.
Worse, it earned the notoriety of making the worst new electric car to hit the U.S. market this year.
Customers were so outraged they quickly introduced a policy in June to compensate owners for their trouble.
VinFast lost more than $80 billion in market value on Tuesday but remains the world’s third most valuable automaker behind Tesla and Toyota, underscoring the company’s dire valuation earlier this week. overrated.
VinFast’s Thin Free Float Brings High Share Price
To really understand the staggering size of VinFast’s market cap, let’s compare it to its automotive peers.
According to Morningstar data cited by Yahoo Finance, Toyota’s market cap is lower than its revenue over the past 12 months. This is a reasonable valuation for an established industry leader. GM and Ford, by contrast, face steeper discounts from investors.
In the growth stock space, EV makers such as Rivian, NIO and Xpeng Motors are valued at as much as six times their respective revenues. Under Elon Musk, Tesla commands a higher premium as investors expect a bigger share of the high-margin gains from its self-driving software FSD.
In stark contrast, VinFast trades at a staggering 350 times its annual sales. That raises serious questions about its market valuation.
However, while it might be tempting for short sellers to bet heavily on air and finally shake off its exorbitant valuation, it won’t be easy.
Just finding a prime broker capable and willing to lend stock can be extremely challenging for Chanos, or anyone willing to place a short bet.
that is because 99% of the stock is held by one person: Chairman and founder Pham Nhat Vuong became Asia’s second-richest paper tycoon at one point this week with VinFast.
Moreover, the collateral requirements that come with shorting VinFast can be prohibitively high, since such bets can quickly fail at the slightest bit of buying pressure.
For anyone willing to take a risk on such a volatile stock, it might be easier to take Chanos’s indirect advice and look for opportunities in the options market.