With regional household names like Grab, GoTo, and perhaps Carousell set for offshore listings later this year, Vingroup subsidiary and electric vehicle manufacturer VinFast is itching to do the same, making it one of the few tech firms in Vietnam to publicly consider an IPO abroad. There are many reasons for VinFast to woo retail investors overseas, including the usual factors of prestige and liquidity, but also because doing so in Ho Chi Minh City is a much more complex and difficult process.
In mid-May, VinFast said it was mulling fundraising options, including a listing via an IPO or SPAC merger in the US that could value VinFast at around USD 60 billion, according to reports. Shortly after, aviation firm Bamboo Airways, which characterizes itself as a startup airline, told Reuters that it planned to raise up to USD 200 million through a listing in the US, with the goal of reaching a potential market capitalization of up to USD 4 billion.
And four years ago, VNG Group, which now has its hands in video games, fintech, messaging, and more, said it was exploring an IPO on the Nasdaq but has since refrained from mentioning the matter publicly.
The quest for ticker symbols in New York, if successful, could be boons for the firms, said Ho Quoc Tuan, a senior lecturer at the University of Bristol. “First, as these companies [VinFast and Bamboo Airways] are not yet profitable, listing abroad is a better route for them. Second, they will be recognized as successful companies by locals, which might lead to easier access to debt financing from banks,” Tuan said, adding that offshore listings offer access to international financial markets, where the cost of capital is much cheaper than in Vietnam.
“In Vietnam, onshore listing is even harder than listing abroad. The law demands local firms be profitable before being considered for listing by requiring a return-on-equity of at least 5%,” Tuan said, adding that this may propel tech firms to head to public markets outside of Vietnam. “There are pre-listing boards locally known as UPCom, but it adds very little value to tech companies in terms of capital raising, liquidity, and overall reputation,” he added.
While VinFast may have the right conglomerate backing to become Vietnam’s first tech firm to go public overseas, other companies have to grapple with an array of challenges, including regulatory approval, foreign ownership limitations, and foreign exchange restrictions, according to analysts.
“Vietnam’s regulatory landscape is quite different compared with other jurisdictions. Although Vietnam has a much more open investment regime now under the new securities law than it has in the past, it is still a regulatory regime where there are foreign ownership limitations for certain sectors,” said Chris Milliken, senior associate at law firm Freshfields Bruckhaus Deringer.
“For local firms wishing to list abroad, they have to first navigate both the Vietnamese regulatory framework and the rules of the offshore jurisdiction. But these can be very challenging and complicated because there are a lot of restrictions in Vietnamese law on the local companies and people who are investing locally,” Milliken said, adding that the “greatest challenge” would be structuring the IPO in a way that satisfies the demands of both jurisdictions.
Vietnamese companies that wish to go abroad are mandated to apply for approval from the State Securities Commission, but companies whose listing vehicle—a company or entity that owns shares of the company that intends to go public—is not Vietnamese will not be subject to this regulation, according to Milliken. The process of obtaining approval is “relatively difficult” at times, and this option is “quite complicated” as there are foreign exchange constraints when moving money overseas, Milliken said.
Although listing via special purpose acquisition companies, or SPACs, may offer a way to sidestep onerous listing requirements, Milliken explained that only a handful of tech companies in Vietnam are big enough to be bought by a SPAC, before a tight timeline for a SPAC to complete its acquisition within two years is even considered.
Tuan also said that corporate governance standards are “quite stringent” in many main stock exchanges. “Some of these requirements, for example, the separation of chairman and CEO, independent non-executive directors, appropriate procedures for internal control and risk management system, are viewed as burdens by young entrepreneurs,” he added.
Ultimately, Milliken said, it is important for Vietnamese businesses to comply with the law and ensure they tick all the regulatory boxes. Yet, these are new waters for the country’s startups. “It would be great if the government or regulator could provide more guidance too,” he said.