A VinFast EV car on display at the New York Auto Show, April 13, 2022.
Scott Mill | CNBC
BEIJING – A new group of Asia-based companies is considering an initial public offering in the United States, where international listings have often been driven by Chinese startups.
Vietnam-based electric car company One Fast broke new ground with its US listing in August, along with the acquisition of US-listed special purpose vehicle BlackSpeed.
While not strictly an IPO, the listing was soon followed by Vietnamese tech unicorn VNG’s filing to list on Nasdaq. VNG’s products include gaming, fintech and music streaming.
“Something like Win Fast keeps it.” [country] On the map,” said Johan Ennel, a Beijing-based partner at ARC Group.
It sends a message that “despite capital controls, which I think is a major formal obstacle for companies, it is possible for them to do IPOs,” he said.
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VNG noted in its prospectus that Vietnamese law prevents “foreign investors” from owning more than 49 percent of capital used to establish a local company operating in gaming and certain other sectors. As a result, VNG is part of an organization that uses a Cayman Islands holding company to list in the United States, the filing said.
“Our corporate structure involves unique risks, has not been tested in any court and may be rejected by Vietnamese regulatory authorities,” the filing said.
It is unclear when VNG will go public. But companies that scout for potential IPO clients years ago say they are talking to more companies in Vietnam and the surrounding region.
As local companies grow, “they are increasing the ability of these markets to provide the capital they need,” said Drew Bernstein, co-chairman of accounting firm Marcom Asia. “It’s still very early stages of the game.”
Bernstein said he attended investment conferences in Malaysia and Vietnam in late October, where many of the attendees were the same people he had met on the China-USIPO circuit over the past 10 to 15 years.
Since the collapse of Didi in the summer of 2021, regulation and a brisk US IPO market have stalled most Chinese listing plans. According to Renaissance Capital, only 20 China-based companies listed in the United States this year are worth more than $50 million.
Investor relations, capital markets consulting and financial media relations firm The Blue Shirt Group has also worked with several Chinese companies to list in the US.
But the firm’s managing director, Gary Dvorchuk, said Blue Shirt held a seminar in April with 20 to 30 Vietnamese-based companies about the US IPO path. Many of the companies were in technology, such as payments, online games and e-commerce, he said.
“There is nothing in Thailand unlike the rest of Asia, nothing in Indonesia,” he said. “So the fact that you’re seeing so many in Vietnam is really meaningful.”
A growing startup ecosystem
CNBC reached out to about two dozen startups with headquarters or a major office in Vietnam to ask about their U.S. IPO plans. Most of those who responded said that any listing is still a ways off, but noted rapid growth in local startups over the past 15 years.
“The capital available for Vietnamese startups has increased significantly compared to 10 years ago,” said Nguyen Nguyen, CEO of fintech startup Trusting Social, whose regional offices include Singapore and Vietnam.
He added that the growing startup ecosystem has attracted many people of Vietnamese heritage to return to their country, while domestic economic growth has increased the size of the market for local players.
Vietnam’s gross domestic product grew 3.6 times on a per capita basis between 2002 and 2022, to nearly $3,700, according to the World Bank.
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. He said on the success of the Southeast Asian ride-hailing company to catchmore Vietnamese companies are starting to expand beyond the domestic market to regional businesses.
For ELSA, “Our ambition since we started the company has always been to be a global business with a global business,” Wan said, adding that “USIPO will help us with that global footprint.”
Of the 103 US IPOs this year, 10 were from companies based in Southeast Asia – split between Singapore and Malaysia, according to Renaissance Capital data as of Nov. 29.
“It is unusual to see this many listings from Asian companies outside of China,” the firm said. “However, none of them are of significant size.”
George Chan, global IPO leader at EY, expects “a lot” of companies from Southeast Asia to reach the IPO stage in the next 12 to 18 months, and Hong Kong exchanges may also be considered.
This trend is not replacing Chinese IPOs in the U.S., Bernstein said, but rather creating new opportunities. MarcumAsia has expanded its offices in Beijing, Tianjin, Guangzhou and Shanghai, and opened an office in Hong Kong this fall.
Marcom Asia will open an office in Singapore in May 2022 and currently has no plans for other offices in Southeast Asia, he said. “There aren’t enough big deals in markets outside of China to give people the sense of security to get deals done.
Ultimately, global IPO markets need to recover before any company can make serious plans.
“There’s certainly a very strong pipeline of companies from Southeast Asia that are evaluating the U.S. markets,” Bob McCoy, Nasdaq’s vice chairman, said in a phone interview this fall. He noted that given the market conditions, many companies are delaying their listing plans until the first half of next year.