VinFast motors ahead on debut
VinFast's spectacular debut on the Nasdaq exchange is likely to encourage more South-East Asian companies to explore the option of listing in the US through mergers with special purpose acquisition companies.
On Tuesday, VinFast's shares gained 255% to US$37.06 following the Vietnamese electric vehicle maker's merger with Black Spade Acquisition. The stock fell 19% on Wednesday and 34% on Thursday, to US$20, for a more moderate 91% gain from the pre-merger close of US$10.45.
At Tuesday's closing price, VinFast's market capitalisation was US$85bn compared with an equity valuation of US$23bn when the merger was announced, and well above Ford Motor's market cap of US$48bn and General Motors' US$46bn. By Thursday, that heady valuation had shrunk to US$46bn.
VinFast CFO David Mansfield told IFR the company was "pleasantly surprised with the trading of the shares and the initial performance". Mansfield said the listing would unleash greater opportunities for Vietnamese brands to participate in global markets.
The extremely limited free-float is one reason for the surge in the stock price but bankers still insist a read across for other companies in Asia is possible.
"VinFast's surprise positive listing shows that risk appetite has risen from the dead and investors are willing to give an emerging market company a chance in the highly competitive electric vehicle sector," an ECM banker said. He added that there was new investor interest in the sectors that were beaten down considerably in 2022 – like technology and EVs. "We expect some of the stalled SPAC mergers to get a new lease on life," he said.
Moreover, with most South-East Asian domestic IPO markets looking extremely quiet, issuers from the region may see a better chance of listing abroad as many US-listed SPACs are nearing the deadline by which they must announce a merger or return IPO investors' money.
Prabhu Antony, co-founder of Nasdaq-listed SPAC Stonebridge Acquisition Corp, said sentiment in the US IPO market has improved drastically and this should have a positive ripple effect on the SPAC markets. "The lack of depth and liquidity in South-East Asian capital markets presents a great opportunity for companies from the region, [once] listed in the US, to lead the consolidation in the heavily fragmented fintech and payment markets."
StoneBridge has announced a plan to combine with Indonesian fintech player DigiAsia Bios at an equity valuation of US$500m. Last week, it extended the deadline to complete the merger to September 20 from August 20.
Inspired by VinFast, Philippines property developer DoubleDragon earlier this month said it was planning to list its Singapore-registered subsidiary Hotel101 Global on Nasdaq through a merger with an as yet unidentified SPAC. Consulting services provider Singapore's Aeries Technology has announced a merger with Worldwide Webb Acquisition Corp at an equity valuation of US$656m and Singapore-based bitcoin miner Future Dao Group plans to merge with Metal Sky Star Acquisition Corp at a valuation of US$350m.
Still, bankers point out that other companies may need to do more than just list, as they will need funds to grow their businesses. VinFast does not immediately need money because parent Vingroup and lenders have provided US$8.2bn of capital since the EV business was separated out in 2017.
DoubleDragon has indicated that it plans to raise fresh capital, although it has not announced the details yet. Yorkville Advisors Global has signed an agreement to allow it to purchase up to US$100m of shares in DigiAsia, subject to certain conditions.
Analysts also said VinFast's dramatic stock market surge was due largely to the illiquidity. Around 1.83m shares were traded on Thursday, down from 6.89m on Tuesday. VinFast founder Pham Nhat Vuong is the beneficial owner of 99% of VinFast's 2.3bn ordinary shares after the merger through his flagship company and affiliates. According to a regulatory disclosure there is a 180-day lock-up on certain equity holders of VinFast.
"There is no meaningful free-float and that is why VinFast's share can go to the moon and back," an equity analyst said.
Capital-raising plan
Analysts are also sceptical that VinFast will be able to sustain the listing gains given the low liquidity of the stock and the company's loss-making business. "The real share price discovery will happen only when there are more shares with the public," a Singapore-based analyst said.
VinFast's Mansfield said the company had sufficient resources to support its business based on its current cash and available credit, as well as additional funding support from Vingroup and its chairman, but would look to raise capital in the next 18 months. "While VinFast will need capital to fund its expenditures in the future, current market conditions are more challenging for a high-growth EV company like VinFast to raise capital," he said.
VinFast’s revenue in the first quarter of this year was D1.97trn (US$83.5m), down 49% from D3.88trn in the first quarter of 2022. Its net loss widened 46% to D14.1trn from D9.66trn.
Black Spade was founded by Black Spade Capital, the private investment arm of Lawrence Ho, the head of casino operator Melco Resorts & Entertainment. Chardan was adviser to VinFast and Jones Trading Institutional Services to Black Spade.
The successful merger and listing of VinFast could also provide a ray of hope for the three SPACs: Pegasus Asia, Novo Tellus Alpha Acquisition and Vertex Technology Acquisition Corporation, which listed on the Singapore Exchange in 2022, following IPOs of S$150m (US$110m), S$150m and S$170m respectively. They have until next year to announce mergers.
"The situations are different but we are hoping there is an overall improvement in the sentiment towards SPACs," said an ECM banker with knowledge of one of the transactions.
