|Inside Vinfast’s automobile processing plant in Cat Hai, Hai Phong City. – The carmaker is considering an IPO in the US. – Photo vingroup.net|
Successful IPOs in foreign markets will provide additional capital for these enterprises to improve and expand their businesses, services and products. By doing that, they can attract even more investments from other international organisations or institutions, said the State Securities Commission of Viet Nam.
Overseas IPOs also help to promote these companies’ images in international markets.
“When a company files for an IPO in a foreign stock market, it can raise strong cash flows, build confidence in foreign investors, enhance its position and image, and expand markets,” Nguyen Thanh Ha, President of SBLAW Limited Liability Company, told Vietnam News Agency.
With strong economic development, some of Viet Nam’s leading enterprises are planning IPOs as they aim at bigger ambitions which also translate into greater capital.
Ha said that the capitalisation level in Viet Nam’s stock market maybe not strong enough or saturated, resulting in top enterprises seeking new resources from international markets with a target of brand internationalisation, business expansion and fundraising.
The wish to file for IPOs abroad also demonstrates that Vietnamese enterprises’ legal capacity is improving, and they are able to meet requirements of international stock exchanges and legal systems.
Caution on legal issues and other risks
Pursuant to Article 71 of the Government’s Decree No.155/2020/ND-CP on detailing the implementation of a number of articles of the Law on Securities, a prerequisite for an international listing is to meet the foreign ownership ratio in accordance with the law. Viet Nam still restricts the participation of foreign investors by industry or even does not allow them to invest.
Companies with higher proportion of foreign ownership will have smaller chances in raising capital through international listings.
In addition, companies must comply with the law on foreign exchange management. Therefore, listings on foreign stock markets are also subject to the Ordinance on Foreign Exchange 2005, which was amended and supplemented in 2013, and the Government’s Decree No.70/2014/ND-CP on detailing the implementation of some articles of the Ordinance on Foreign Exchange and the Ordinance on amending and supplementing some articles of the Ordinance on Foreign Exchange.
The Vietnamese issuer has to open a foreign currency account at an authorised credit institution in Viet Nam to receive any foreign currency earned from the listing, without requiring the issuer to open an account in the country where the stocks are listed.
This means foreign investors who purchase shares cannot transfer money to the Vietnamese issuer’s account, if the bank serving this organisation does not have a branch or a transaction office in the listed country.
On the financial and accounting standards front, Vietnamese companies also face challenge as they must apply the accounting book system according to Vietnamese Accounting Standards (VAS), while the international exchanges adapt global standards or standards accepted by many countries like Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS) or International Accounting Standards (IAS).
Enterprises must also obey the regulations of international exchanges, including strict conditions for joining, profit before tax, shares distribution, financial status and liquidity.
As companies are listed in foreign markets, risks of being acquired or merged are rising, and costs for complying with regulations on listing, reporting, disclosing information and corporate management in the international markets are higher.