A VinFast EV car on display at the New York Auto Show, April 13, 2022.
Scott Mlyn | CNBC
BEIJING – A new group of Asian companies is considering initial public offerings in the United States, where international IPOs were once driven primarily by Chinese startups.
Vietnam-based electric car company VinFast broke new ground with its US listing in August, merging with US-listed special purpose acquisition company Black Spade Acquisition.
Although not strictly an IPO, the listing was soon followed by Vietnamese tech unicorn VNG’s application to list on the Nasdaq. VNG’s products include gaming, fintech and music streaming.
“Something like VinFast gets to the point [country] on the map,” said Johan Annell, Beijing-based partner at ARC Group.
It sends the message that “despite capital controls, which I think are the biggest formal obstacle to companies, it is possible for them to do IPOs,” he said.
VNG noted in its prospectus that Vietnamese law prohibits “foreign investors” from owning more than 49% of the capital used to establish a local company in the gaming and certain other sectors. As a result, VNG is part of a restructuring that involves using a Cayman Islands holding company to list in the U.S., the filing said.
“Our corporate structure poses unique risks, has not been reviewed by any court, and may be rejected by Vietnamese regulators,” the filing said.
It is unclear when VNG will go public. But companies that scout for potential IPO clients years in advance say they are talking to more companies in Vietnam and the surrounding region.
As local companies grow, “they exceed the ability of those markets to provide the capital they need,” said Drew Bernstein, co-chair of accounting firm MarcumAsia. “It’s still early in the game.”
Bernstein said he attended investment conferences in Malaysia and Vietnam At the end of October, where many of the participants were the same people he had met over the past 10 to 15 years as part of the China-US IPO.
Since the Didi controversy in the summer of 2021, regulation and a tepid U.S. stock market have stalled most Chinese stock market plans. Only one of the 20 China-based companies that listed in the U.S. this year has raised more than $50 million, according to Renaissance Capital.
Investor relations, capital markets advisory and financial media relations firm The Blueshirt Group has also worked with many Chinese companies to go public in the United States
But the company’s chief executive, Gary Dvorchak, said Blueshirt organized a seminar in April with 20 to 30 Vietnam-based companies about the path to a U.S. IPO. Many of the companies are in technology, such as payments, online gaming and e-commerce, he said.
“Completely unlike the rest of Asia, there is nothing in Thailand, some in Indonesia,” he said. “The fact that you see so many people in Vietnam is really significant.”
A growing startup ecosystem
CNBC reached out to about two dozen startups with headquarters or a large office in Vietnam to ask about their plans to go public in the United States. Most of those who responded said a public listing was still a long way off, but noted rapid growth of local startups over the past 15 years.
“The capital available to Vietnamese startups has increased tremendously compared to a decade ago,” said Nguyen Nguyen, CEO of fintech startup Trusting Social, whose offices in the region include Singapore and Vietnam.
He added that the growing startup ecosystem has attracted many people of Vietnamese origin to return to their home country, while domestic economic growth has increased the market for local players.
According to the World Bank, Vietnam’s gross domestic product per capita increased 3.6-fold to nearly $3,700 between 2002 and 2022.
ELSA, which uses artificial intelligence to help people learn English, is based in the US, while co-founder and CEO Vu Van is from Vietnam. She said given the success of Southeast Asian ride-hailing service Grab, more Vietnamese companies are starting to look beyond the domestic market to regional operations.
For ELSA, “our goal when we founded the company was always to be a global company with a global presence,” Van said, adding that “a U.S. IPO would help us with that global presence.”
Of the 103 U.S. IPOs this year, 10 were from companies based in Southeast Asia – spread across Singapore and Malaysia, according to Renaissance Capital data as of Nov. 29.
“It is unusual to see so many listings of Asian companies outside China,” the company said. “However, none of them are of any significant size.”
George Chan, global IPO lead at EY, expects “many” Southeast Asian companies to reach the IPO stage in the next 12 to 18 months and may also consider the Hong Kong stock exchange.
The trend is not to replace Chinese IPOs in the U.S. but rather to create new opportunities, Bernstein said. MarcumAsia is expanding its offices in Beijing, Tianjin, Guangzhou and Shanghai and opened an office in Hong Kong this fall.
MarcumAsia opened an office in Singapore in May 2022 and currently has no plans for additional offices in Southeast Asia, he said. “There haven’t been enough big deals done in markets outside of China to give people a sense of security that they can get the deal done.”
Ultimately, global IPO markets must recover before a company can make serious plans.
“There is definitely a very strong pipeline of companies from Southeast Asia evaluating the U.S. markets,” Nasdaq Vice Chairman Bob McCooey said in a telephone interview this fall. He noted that given market conditions, many companies are postponing their IPO plans to the first half of next year.
Source : www.cnbc.com