39 ASIAN LEGAL BUSINESS – OCTOBER 2023 WWW.LEGALBUSINESSONLINE.COM CAPITAL MARKETS entity on an offshore exchange. That’s why they need to go through some corporate restructuring to have an offshore arm to hold the business and then use that offshore entity as a listing entity,” Nguyen explains. Other logistical issues surrounding fungibility of shares and distribution of dividends also prevent Vietnamese companies from being directly listed overseas, adds Nguyen. Nguyen explains that international shareholders in a Vietnamese company expect any dividend to be transferred to their accounts. But, it remains uncertain under the current regime if a Vietnamincorporated company is able to transfer funds offshore to pay dividends to offshore shareholders. NO ONE SIZE FITS-ALL Tina LeDinh, managing partner of Allen & Overy’s Vietnam office, also adds that the specific characteristics of each issuer will determine whether a local listing and international bookbuild under the current regulatory framework is feasible. These considerations can include capital structure and foreign ownership limits, for example. “We haven’t yet figured out a onesize-fits-all structure in terms of the regulatory framework to allow the traditional international book-building to be merged with Vietnam’s local listing requirements, and so a lot of these deals are being structured on a company-bycompany basis,” LeDinh explains. As an investor, one looks at the capital-related controls in the jurisdiction of the target company. With the strict restrictions in Vietnam, companies would look to set up their investment vehicle in countries which allow investors more monetary flexibility, which in turn attracts more capital, LeDinh adds. Moreover, the process to list overseas, or set up holding companies abroad, requires permission from various government regulators. The State Securities Commission of Vietnam (SSC) is overwhelmed with the number of companies submitting application for various things and have not come out with detailed guidelines on the specific process, LeDinh says. “If a company wishes to list overseas, it could ask the SSC for guidance, but I’m not sure if, at this time, the SSC would be in a position to provide specific guidance or regulate the implementation of the process. That may take some time,” LeDinh adds. With an overseas listing entity, companies must then decide between the traditional IPO route and a de-SPAC merger. TO SPAC OR NOT TO SPAC In 2021, Vietnamese e-commerce company Society Pass became the first technology company from the country to complete a traditional IPO in the U.S., raising $26 million in gross proceeds. VinFast went the SPAC route, merging with a shell company to complete its listing on Nasdaq. The stock opened at $22, more than double the $10 per share agreed upon with VinFast’s SPAC partner Black Spade Acquisition, which valued VinFast at $23 billion. According to the U.S. Securities and Exchange Commission (SEC), a backdoor listing through a SPAC provides more certainty as to the amount raised, potentially a shorter timeframe than the traditional IPO process, access to liquidity that might not have otherwise been available and a strategic partnership with an experienced management team that the SPACs sponsors put together. But, LeDinh believes that while SPACs are attractive for these reasons, the growing regulatory scrutiny around them makes the traditional IPO route a better option. “At the end of the day, there’s more certainty around pricing when you have underwriters running your books and doing investor education on the financials of the company itself versus having a SPAC undertaking a merger with the target company,” she adds. LeDinh also believes that as the local capital market recovers, more Vietnamese companies will look to list on local exchanges. LOOKING FORWARD A Deloitte report found that the Vietnam market recorded just eight IPOs in 2022, of which six were completed in the first half. This slowdown was consistent with the global trend, and LeDinh believes local listings will pick up as the market recovers. “A lot of Vietnamese companies feel very strongly about listing in Vietnam because they’re homegrown Vietnamese companies, and they want to allow Vietnamese retail investors to participate in ownership of their companies.” For those in Vietnam looking to list in the U.S., the recovery of global markets does allow companies to put their offshore listing plans back on track, but it does not necessarily mean an uptick in the number of entities going public. “For companies that are going to market now, the timing is driven by their own capital needs, and in some cases, they need just to honour commitments that they’ve had with their shareholders and other stakeholders,” LeDinh says. “It may give some companies comfort and confidence that they can explore something like this, but again, I think it will come down to readiness and the companies’ own timelines. I’m not sure that this will necessarily inspire like a whole slew of U.S. IPOs next year, but I think it will give companies more comfort that something like this can be explored,” she adds. “The local framework, for the time being, is not fully equipped to facilitate a direct listing of a Vietnamincorporated entity on an offshore exchange. That’s why they need to go through some corporate restructuring to have an offshore arm to hold the business and then use that offshore entity as a listing entity.” — Nguyen Van Hai, YKVN
RkJQdWJsaXNoZXIy MjA0NzE4Mw==