Vietnamese companies eye U.S. IPO market amid lull in Chinese listings

BEIJING — A brand new group of Asia-based firms are considering preliminary public choices within the U.S., the place worldwide listings had been as soon as pushed largely by Chinese language startups.

Vietnam-based electrical automobile firm VinFast broke new floor with its U.S. itemizing in August, by way of its merger with the U.S.-listed particular goal acquisition firm Black Spade Acquisition.

Whereas not strictly an IPO, the itemizing was quickly adopted by Vietnamese tech unicorn VNG’s submitting to checklist on the Nasdaq. VNG’s merchandise embody gaming, fintech and music streaming.

“One thing like VinFast places the [country] on the map,” mentioned Johan Annell, Beijing-based associate at ARC Group.

It sends a message that “regardless of capital controls, which I feel is the most important formal barrier for firms, it’s doable for them to do IPOs,” he mentioned.

VNG famous in its prospectus that Vietnamese legislation prevents “overseas buyers” from proudly owning greater than 49% of the capital used to determine a neighborhood firm working in gaming and sure different sectors. Consequently, VNG is a part of a reorganization which makes use of a Cayman Islands holding firm to checklist within the U.S., the submitting mentioned.

“Our company construction entails distinctive dangers, has not been examined in any courtroom and could also be disallowed by Vietnamese regulatory authorities,” the submitting mentioned.

It is unclear when VNG will go public. However corporations that scour for potential IPO purchasers years prematurely say they’re speaking to extra firms in Vietnam and the encompassing area.

As native firms develop, “they’re outgrowing the power of these markets to supply the capital that they want,” mentioned Drew Bernstein, co-chairman of accounting agency MarcumAsia. “It is nonetheless the very early levels of the sport.”

Bernstein mentioned he attended investing conferences in Malaysia and Vietnam in late October, the place most of the attendees had been the identical individuals who’d he’d met over the past 10 to fifteen years within the China-U.S. IPO circuit.

For the reason that fallout over Didi in the summertime of 2021, regulation and a tepid U.S. IPO market have stalled most Chinese language itemizing plans. Solely one of many 20 China-based firms that listed within the U.S. this 12 months raised greater than $50 million, in line with Renaissance Capital.

Investor relations, capital markets advisory and monetary media relations agency The Blueshirt Group has additionally labored with many Chinese language firms to checklist within the U.S.

However the agency’s managing director, Gary Dvorchak, mentioned Blueshirt organized a seminar in April with 20 to 30 Vietnamese-based firms concerning the path to a U.S. IPO. Lots of the firms had been in tech, reminiscent of funds, on-line video games and e-commerce, he mentioned.

“Simply in distinction the remainder of Asia there’s nothing in Thailand, some in Indonesia,” he mentioned. “So the truth that you see so many in Vietnam is de facto significant.”

CNBC reached out to about two dozen startups with headquarters or a serious workplace in Vietnam to ask about their U.S. IPO plans. Most of those that responded indicated any itemizing was nonetheless a methods off, however famous fast progress in native startups over the past 15 years.

“Capital accessible to Vietnamese startups has elevated tremendously in comparison with 10 years in the past,” mentioned Nguyen Nguyen, CEO of fintech startup Trusting Social, whose workplaces within the area embody Singapore and Vietnam.

He added the rising startup ecosystem has attracted many individuals of Vietnamese heritage to return to their dwelling nation, whereas home financial progress has elevated the market dimension for native gamers.

Vietnam’s gross home product surged 3.6 occasions on a per capita foundation between 2002 and 2022, to just about $3,700, in line with the World Financial institution.

ELSA, which makes use of synthetic intelligence to assist individuals be taught English, is predicated within the U.S. whereas co-founder and CEO Vu Van hails from Vietnam. She mentioned given the success of Southeast Asian ride-hailing firm Seize, extra Vietnamese firms are beginning to look past the home market to regional enterprise.

For ELSA, “once we began the corporate our aspiration has all the time been a worldwide enterprise with a worldwide footprint,” Van mentioned, including {that a} “U.S. IPO would assist us with that world footprint.”

Out of 103 U.S. IPOs this 12 months, 10 had been from firms primarily based in Southeast Asia — cut up between Singapore and Malaysia, in line with Renaissance Capital knowledge as of Nov. 29.

“It’s uncommon to see this many listings from Asian firms outdoors of China,” the agency mentioned. “Nonetheless, none of those are of a big dimension.”

George Chan, world IPO chief at EY, expects “quite a bit” of firms from Southeast Asia will attain the IPO stage within the subsequent 12 to 18 months, and may additionally take into account the Hong Kong alternate.

The pattern is just not changing Chinese language IPOs within the U.S., Bernstein mentioned, however reasonably creating new alternatives. MarcumAsia is increasing its workplaces in Beijing, Tianjin, Guangzhou and Shanghai, and opened an workplace in Hong Kong this fall.

MarcumAsia opened an workplace in Singapore in Could 2022 and would not have plans for different workplaces in Southeast Asia proper now, he mentioned. “There have not been sufficient massive offers completed within the markets outdoors of China to offer individuals the sense of safety that they’ll get the deal completed.”

Finally, world IPO markets have to recuperate earlier than any firm could make critical plans.

“There may be positively a really strong pipeline of firms from Southeast Asia who’re evaluating the U.S. markets,” Bob McCooey, a vice chairman at Nasdaq, mentioned in a telephone interview this fall. He famous that given market situations, many firms are delaying their itemizing plans to the primary half of subsequent 12 months.