Vinfast 'certainly is' a new meme stock: Here's why

Vietnamese EV maker VinFast (VFS) has experienced "record highs" and declines in its stock since its IPO debut just two weeks ago. More recently, the stock is reacting to analyst comments asserting it as a new meme stock.

StockTwits Senior Writer Tom Bruni sits down with Yahoo Finance Live to break down VinFast's shares characteristics that qualify it as a meme stock.

A meme stock is "defined as anything that has widespread retail investor attention and participation, and there tends to be a huge disconnect between what's happening in the securities price and the underlying business," Bruni states.

Bruni continues: "We are certainly seeing that with VinFast because, as you've said, it surged from $10 to over $90 recently making it the third-largest automaker globally at a $200 billion valuation, and yet it only expects to produce about 40,000 cars this year."

Bruni goes on to comment on whether VinFast's valuation is justified among competitors in the EV landscape, and how retail traders' behaviors have changed since the meme stock frenzy.

Video transcript

[AUDIO LOGO]

- Vietnamese EV maker VinFast quickly becoming one of the most buzzed-about stocks since its IPO earlier this month. That stock down today, but it has surged since its debut. But the stock extending Tuesday's decline after famed investor Jim Chanos called VinFast a meme stock. I spoke with VinFast CEO on the day the company went public about the company's path to profitability.

MADAME THUY LE: So far, our shareholders have invested almost $10 billion into the company. We got the commitment of $2.5 billion more from Vingroup and our chairman. So we believe that with all the investments and the strategy that we have pursue, we are on the right path to profitability.

- So, where does VinFast fall in the meme trade? Here to discuss this and more, we've got Tom Bruni, StockTwits Senior Writer. Is it a meme stock?

Hey. Thanks for having me. Yeah, it certainly is. I think a meme stock is defined pretty much as anything that has widespread retail investor attention and participation. And there tends to be a huge disconnect between what's happening in the securities price and the underlying business. And we're certainly seeing that with VinFast because as you said, it surged from $10 to over 90 recently, making it the third largest automaker globally at a $200 billion valuation, and yet it only expects to produce about 40,000 cars this year.

- Tom, what is it though that's attracting the attention from the retail traders? Why do they like a name like VinFast?

TOM BRUNI: Yeah, so I think just in general, retail investors are looking for the investing in the future, things that are going to change the world and hopefully pay off as an investment. So the electric vehicle space has always been something that they've been interested in. At the end of the day, everyone's looking for the next Tesla. They want to invest in whether it be Fisker or VinFast. They're looking for the start up in the space that's going to grow with the same potential as Tesla.

- Yeah, I mean, it feels like this is a story that we have seen before with other EV makers. But I wonder how much of the stock moves have been exaggerated just because of the limited number of stock that's available. There's been much made about the fact that Vingroup, which is the parent company of VinFast, their chairman has an outsized stake in VinFast.

TOM BRUNI: Yeah, I think that's the real story here. I'd be hard pressed to say that the $200 billion valuation is justified based on where the business is. But if you look at of how the company is structured, through its SPAC, it offered about 17 million shares for the public to trade on the NASDAQ, but that's only 0.3% of the company's total shares.

The rest are closely held by VinFast Group CEO and founder. So there's not a lot of availability for the public to trade. And if you've got a lot of demand and not a lot of supply, that tends to drive up the price.

- Tom, what are you seeing on StockTwits specifically just in terms of the interest and how that's certainly, I would guess, has changed dramatically and even just the last couple of days?

TOM BRUNI: Yeah, for sure. So over the last month or so since it came public, it's grown to about 5,000 people having it on their watch list, which is no small feat for only being a month old. Additionally, it's one of the most highly active streams on our platform. So people are definitely participating in the conversation. And a lot of people are just waiting on the sidelines trying to figure out what's actually happening here.

- You know, we've been following the meme trade since what was it? 2021, where we saw the incredible run with GameStop. But we've heard more and more that the retail trader today is a lot more sophisticated. It's not just about going after that meme stock. It is about investing in ETFs.

I wonder what you have seen. I mean, take this VinFast is just one example. But are we seeing money still chasing these meme stocks? Or are we seeing it broaden out, if we're talking strictly the retail investor?

TOM BRUNI: Yeah, so I think it depends on the retail investor that we're talking about. Everyone has different goals and objectives in the market. Some people are traders. Some people are longer term investors. So it really depends.

For the traders, they're definitely going to stick around and play these meme stocks, especially when there's news because at the end of the day, volatility in these stocks create opportunity for those short-term traders. And then you also have a subset of longer-term investors. A good example is in AMC.

Now that kind of the imminent bankruptcies off the table, you have this group of people that believe in the iconic brand, believe that movie theaters will come back as a major business. They're trying to figure out now that the dust has settled, what is the true value of AMC? And can this company really turn itself around? So I think there's a good mix of both short-term participation from the traders and longer-term focus from actual investors.

- So, Tom, I think, I know the answer to this question. But this meme phenomenon, we certainly have been talking about it so much over the last couple of years. Is this something that you think is here to stay?

TOM BRUNI: Yeah, absolutely, I think, just with the way that communication and information is disseminated in today's world both on social media, whether it be StockTwits or Reddit or Twitter. And we live in an age where Gen Z and millennials are interested in investing more than previous generations. They're taking control of their financial future. And they're trying to find opportunities.

So I think the trend is here to stay. Honestly, the fact that we're talking about it here at the end of 2023 is kind of a testament to that. It's just a matter of which stocks become "meme" stocks because it's kind of a moving target.

We had Tupperware brands. We had Yellow with their bankruptcy recently. So there's always going to be money flowing into some sort of company that's "defined" as a meme stock, so.

- And Tom, we didn't even talk about investors who are still buying into Bed Bath & Beyond. That is for another conversation. Tom Bruni, StockTwits Senior Writer, good to talk to you today.

TOM BRUNI: Thanks for having me.