Listing overseas a problematic process

Saigon Asset Management (SAM) agreed to terms on February 15 with Mr. Sam Van, a US capital market expert and former director of international listings at the New York Stock Exchange, who will help Vietnamese companies seeking to raise capital or list in the US. Cooperation between SAM and Mr. Van will also make it easier for Vietnamese enterprises to borrow money from US financial institutions when buying high-value products from US enterprises such as aircraft, airport equipment, or medical equipment.

Mr. Louis Nguyen, Chairman and CEO of SAM, said that due to the current market conditions there is strong demand among Vietnamese companies to raise capital and list on an overseas market. “But there appears to be a lack of understanding about procedures, the complexity, and the pros and cons of an overseas listing,” he added.

Local ambition

The Vietnam-based electric vehicle maker VinFast announced last December that it has filed for an initial public offering (IPO) in the US and plans to list ordinary shares on Nasdaq under the ticker “VFS”. The number of shares to be offered and the price range are yet to be determined. While the timeframe has also not been specified, its parent, Vingroup, said last May the IPO would be delayed to 2023 because of market uncertainty.

The Masan Group, meanwhile, announced in 2021 that it is considering conducting an international IPO for its consumer retail unit, The CrownX, after announcing the signing of a $350 million primary investment in the business by a consortium of investors, including TPG, Platinum Orchid, and the SeaTown Master Fund. A total of $1.5 billion was invested in the business in 2021. After finishing fundraising, the group is looking forward to an international IPO for The CrownX in the 2023-2024 period.

Other major enterprises in Vietnam also harbor dreams of conducting an IPO and listing shares overseas, such as VNG, Tiki, Vinamilk, and Vietjet Air. Notably, Vietnamese delivery startup Loship aims to become the first Vietnamese company to list on a US stock exchange in more than a decade. After closing a $12 million funding round co-led by the Ant Group-backed BAce Capital, Loship said it hopes to debut on the New York Stock Exchange by 2024 after reaching profitability within 18 to 24 months.

The US is the market that most Vietnamese businesses are targeting for IPOs. According to Mr. Van, Nasdaq currently has 1,200 companies from 45 countries and territories outside of the US currently listing shares, or about 30 per cent of the total. “Vietnamese businesses can seek capital in Hong Kong (China), Singapore, or the US,” he added. “The US is one of the oldest capital markets in the world, and despite its complicated structure still accepts listing companies that are losing capital if they prove they can develop well in the future. In my opinion, capital in the US is also more competitive than elsewhere.”

Meanwhile, Mr. Nguyen said the US has investment funds with up to $60 billion in capital, with recent deals including the American Financial Group (DFC) pouring $200 million into SeaBank in Vietnam. “Investment in Vietnam and Vietnamese enterprises with high growth rates compared to the region is growing in demand among foreign investors,” he added.

No success as yet

Many Vietnamese enterprises have made moves to conduct overseas IPOs but there have been no results to date. If it successfully conducts an IPO in the US and lists on Nasdaq, VinFast would be the first Vietnamese enterprise to do so directly on an international exchange.

Vinamilk received approval in 2008 from the Singapore Stock Exchange to issue and list part of its capital on the exchange. However, in 2011, its plans were officially canceled and replaced by a domestic issuance.

Although VNG has signed an MoU with Nasdaq on preparing for an IPO and listing, it is currently listed in Vietnam on the UPCoM exchange.

A representative from Loship said its plans in regard to an IPO and fundraising are being carefully considered in the context of global economic movements. “Loship has made many internal adjustments in line with its development plan instead of continuing to pursue an IPO plan when conditions do not yet allow it,” the representative added. “It believes that after the next six months will be a more appropriate time for it to offer more accurate information on its intention to access capital.”

Vietnam has had only two companies list overseas: Vingroup, which listed convertible bonds on the Singapore Stock Exchange in 2012, and Hoang Anh Gia Lai, which listed depository certificates on the London Stock Exchange in 2011, but these were then canceled.

Mr. Kent Wong, Chairman of the Legal Sector Committee at the European Chamber of Commerce in Vietnam (EuroCham Vietnam), said that domestic companies face barriers in listing overseas. “They will need to comply with the accounting, auditing, and corporate governance standards of foreign stock exchanges and at the same time comply with Vietnam’s regulations on overseas direct investment,” he was quoted as saying. “For example, if VinFast attempts to list directly, there will be a number of legal barriers to overcome, such as regulations on foreign ownership restrictions of 49 per cent in some business sectors.”

Meanwhile, Mr. Van said the reason why Vietnamese enterprises fail to raise capital or to IPO in the US is that cash flows are not transparent, the language barrier is an issue, or it’s simply “too early” for the company to do so. “Before deciding to call for capital, a startup or Vietnamese enterprise must be prepared,” he added. “If enterprises have a full audit done, a clear financial plan for the future, and transparency in management, they will be able to raise capital in a short period of time.”

Different routes

Most Vietnamese businesses have ambitions to list in the US but it is not that easy. Singapore has become the preferred option instead, as a launch pad to list on the US stock market.

In preparing for VinFast’s IPO, at the end of 2021, Vingroup restructured the ownership of the subsidiary by transferring all contributed capital (totaling 51.5 per cent) in the VinFast Trading and Production JSC (VinFast Vietnam) to VinFast Trading & Investment (based in Singapore). This is also the unit that filed IPO documents with the US Securities and Exchange Commission.

E-commerce platform Tiki, meanwhile, also has ideas about an international IPO and has established a legal entity, Tiki Global, in Singapore.

A report on the Global Financial Centers Index (GFCI) 2022 from Z/Yen Partners and the China Development Institute, notes that Singapore has become Asia’s top financial center, overtaking Hong Kong (China) in world financial center rankings. “The reason for establishing a legal entity in Singapore is due to its geographical location near Vietnam and it is also a famous financial center in the region, with free capital and foreign exchange, access to financial experts, and close and long-term economic cooperative relationships with Vietnam,” Mr. Wong said.

Examples of successful Singaporean companies listing in the US also encourage other businesses in the region to believe in the possibilities. These include SEA, the parent company of Shopee, Garena, and SeaMoney, and PropertyGuru.

As a Vietnamese company with plans to IPO overseas soon, VNG is now busy restructuring its business. VNG Limited was established in the Cayman Islands on April 1 last year and expects to receive all shares of foreign investors to hold 49 per cent of VNG’s charter capital. This is seen as a move to prepare for an IPO in US. VNG has continuously poured capital into domestic and foreign startups and tech enterprises to diversify its investment portfolio and expand its product and industry ecosystem in the context of volatile markets.

A SPAC (Special Purpose Acquisition Company) has also been mentioned when it comes to the overseas IPOs of Tiki or VNG. This type of company has many advantages compared to traditional methods, for example helping businesses shorten the time to go public, raise more capital, and plan to divest. However, according to Mr. Van, because the SPAC model is not clear, it cannot develop sustainably. Ninety per cent of shares being issued through SPACs will drop to 30 to 40 per cent after the first few years, and if the model is not really sustainable, it will continue to decline. “Whether it is an IPO through a SPAC or a traditional way, cooperation between the parties must have an understanding to be sustainable and effective,” said Mr. Van.