The Vietnamese stock market made its debut in 2000 with the inauguration of the Ho Chi Minh City Stock Exchange, known as HOSE. After almost two and a half decades, HOSE’s index has a bit more than 400 listed stocks. Vietnam’s securities laws have significantly evolved. The first set of regulations was enacted in 1998 in the form of a decree to lay the foundation for the launch of the stock market two years later — the early legal framework was limited and incomplete. Finally, six years after the HOSE was launched the first law on securities was enacted. This law has undergone two updates, one in 2010 and the latest in 2019.
During the last decade or so, a number of bluechip stocks have aimed to list abroad. Overseas listing by a Vietnamese company, however, is inadequately covered in the securities law. Overseas listing remains regulated under a small section of a governmental decree. Only general terms exist. This decree serves as sub-law guidance. Much is left unsaid.
There are several options.
Direct Overseas Listing under the Securities Law – Dual Listing
Dual listing is an obvious path. To list directly on a foreign bourse from Vietnam, a company must be listed in Vietnam first. The company needs to obtain approval from the State Securities Comission (SSC) to make an IPO on a foreign stock exchange. The government’s intention is to make direct listing abroad simple by imposing only light requirements for SSC approval. The applicant need only ensure that an overseas listing will recognize Viertnam’s foreign ownership limits (there are limits in most businesses). It must also conform to Vietnam’s strict foreign exchange controls. Performance and profitability are not the criteria. There is also a post-approval requirement: the overseas IPO must be completed within 90 days from SSC approval, extendable for no more than 30 days if SSC approves.
While it is quite easy to comply with Vietnam’s requirements, Vietnamese companies inevitably face much more stringent hurdles overseas. Hurdles vary depending on the foreign bourses. Several listed companies, such as Vinamilk eyeing Singapore, and VNG (formerly VinaGame) preparing for the US’s Nasdaq, have attempted dual listings. However, to date, there has been no successful direct listing outside of Vietnam. Reasons vary … commercial, legal, technical and otherwise. Incompatibility in terms of accounting and auditing standards, inadequacy of corporate governance and environmental protection standards, and lack of transparency are among the common issues.
Indirect Overseas Listing under the Securities Law – Local Stock Backed Depository Receipts
There is an alternative or derivative option to the conventional direct listing. A Vietnamese listed company can raise capital from investors investing in depository receipts issued in a foreign market and backed by its listed shares in Vietnam.
This path also needs approval from the SSC, and this approval is greater than that required for a direct listing. The Vietnamese company must engage a foreign financial institution which will issue depository receipts abroad. There must also be a securities firm in Vietnam appointed by the foreign financial institution to act as its depository agent. If the Vietnamese company issues new listed shares to back the foreign depository receipts, certain financial requirements kick in: the Vietnamese issuer must have a paid-in capital of at least USD 1.2 million and must have been profitable in the preceding fiscal year.
The second prong of this alternative is for a foreign financial institution to issue depository receipts overseas. This, of course, falls within the realm of another jurisdiction’s laws and regulations. Given the connection with a Vietnamese listed stock, the Vietnamese stock will be under close scrutiny by the foreign regulators. Similar issues as exist with a direct listing — such as lack of transparency, inadequacy of corporate governance, incompatibility of accounting standards, etc, will also be sources of concern.
Even though this alternative route to overseas listing exists, listed Vietnamese companies do not seem to be exploring it to any real extent. The lack of precedent can deter both Vietnamese companies and foreign financial institutions.
Listing overseas outside the Securities Law – SPAC Listing
There is at least one viable and proven route for an overseas listing. That is, it has been successfully tested — listing through a special purpose acquisition company, or SPAC for short.
Vinfast, the electric vehicle maker, listed on Nasdaq through a SPAC registered in Singapore in 2023. Before that, in 2021, the SPAC listing on Nasdaq of the Malaysia-founded tech unicorn Grab, with operations in different Southeast Asian countries including Vietnam, excited markets in the region. In 2022, PropertyGuru, Southeast Asia’s leading prop tech company operating in Singapore (its headquarters), Vietnam, Malaysia, Indonesia and Thailand, was successfully SPAC-listed on the NYSE.
In fact, listing outside the Securities Law regime is not new in Vietnam. Vietnam-based businesses have participated in overseas listings since the early 2000s. These have been mostly Vietnam-based FDI subsidiaries of foreign corporations. While it is the parent that lists overseas, the subsidiary in Vietnam, often among other subsidiaries, forms a significant part of the core assets supporting the overseas listing.
From a Vietnamese law perspective, a SPAC listing often does not fall under the securities law. The Vietnam business is just under the (direct or indirect) ownership of the SPAC that is incorporated outside of Vietnam. This relationship only requires a regular registration of the foreign SPAC’s ownership of the Vietnamese business. It is essential to set up a holding structure in a SPAC-friendly jurisdiction. The Vietnamese company takes steps to restructure its ownership, from wholly/majority local ownership to wholly/majority foreign ownership under the SPAC. This involves obtaining approval for the foreign entity (which can be the SPAC itself or a mere subsidiary of the SPAC) to hold a capital interest in the Vietnamese company (widely known as an M&A approval in Vietnam). This exercise triggers certain Vietnam-specific legal considerations for the Vietnamese company. In particular, it needs to be sure that its foreign ownership stays within all applicable statutory limits. After becoming foreign owned, the Vietnamese company may need to obtain a sub-license or an operating permit in order to continue a certain business, which is not required of a local company. There are periodic reporting obligations for companies operating in Vietnam. Again, reporting requirements become more intensive with foreign ownership.
Once the structure in Vietnam is settled, all that remains is listing the SPAC on a foreign bourse. Of course, to the extent that the Vietnamese business is under the SPAC’s (direct or indirect) ownership and forms part of the SPAC’s business bucket for the listing, Vietnam-related factors are also relevant. Among others, it must be demonstrated to the listing authorities abroad that the SPAC’s ownership of the Vietnamese business has been legally constituted, that the Vietnam operations are compliant with Vietnamese law in all material respects, and so forth. Some of the issues that affect other options – transparency, environmental protection standards, etc. in Vietnam, may also be relevant.
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These options exist for Vietnamese companies when circumstances are aligned. Listing overseas is a deliberate journey. Success is certainly possible, but it requires well-coordinated effort and experience. Importantly, it requires a commitment to plan, prepare, and execute.
