Vietnamese startups encounter challenges in IPOs

06:00 | 29/08/2020 Companies

(VEN) - Initial public offerings (IPOs) offer opportunities for enterprises to attract investment capital, contributing to expanding scale and increasing the value. However, for most startups, it is an unfulfilled dream.

vietnamese startups encounter challenges in ipos

Pouring capital into startups

Despite the impact of the Covid-19 pandemic, many Vietnamese startups have announced successful capital calls. Specifically, Vietnam’s online recruitment platform, Sieu Viet Group, raised US$34 million from Affirma Capital in February 2020. Sieu Viet Group currently operates four job portals in the country, including TimViecNhanh, Vieclam24h, MyWork, and ViecTotNhat.

In early March, STI made a strategic investment in JupViec, a home help service website. This startup had successfully raised capital from the US investment fund Patamar Capital (2018) and CyberAgent Ventures (2015). In April, Vietnam-based e-commerce enabler OnPoint closed its Series A funding round with US$8 million. Leading this Series A consortium round is Kiwoom Investment and DAIWA-SSIAM Vietnam Growth Fund II LP.

In June, the Vietnamese real estate startup Propzy raised US$25 million from Gaw Capital and SoftBank Ventures to develop new product lines and simplify real estate transactions and property logistics services. In addition, Beta Media, the company operating the low-cost movie theater chain Beta Cinemas, with 12 cinema complexes and nearly 60 cinemas nationwide, announced an agreement to contribute US$8 million from the Japanese investment fund Daiwa PI Partners. With this agreement, the company achieved a valuation of VND1 trillion.

According to the World Bank, despite the global crisis and the Covid-19 pandemic, prospects for the Vietnamese economy remain positive for the short and medium term. World Bank Lead Economist and Program Leader for Vietnam Jacques Morisset said Vietnam would be the fifth fastest-growing economy in the world this year if its GDP growth reaches 2.8 percent as forecast. Vietnamese startups are also increasingly diversifying their operations and becoming more professional in business and capital calls.

Accelerating IPOs

Startups usually aim at IPOs in order to expand activities and increase their value. However, for many of them, the process appears too complex and lengthy.

In fact, since the IPO of media and entertainment firm Yeah1 Group Corporation, few Vietnamese startups have debuted on the equity market. Nguyen Anh Nhuong Tong, board chairman of the Yeah1 Group Corporation, said it took the corporation 12 years to prepare for the IPO process. The corporation had to hire an independent auditor to review all its financial records for five years prior to the IPO, he said.

In Vietnam, little capital is mobilized by businesses through the stock market. In 2019, some 1,674 companies mobilized VND93 trillion, but 80 percent of the capital went into 10 large companies. In addition, opportunities to attract public investors depend on many factors, including the business fields in which companies operate. Startups that want to make IPOs must have suitable business models and operate in sectors attractive to investors.

Under current regulations, businesses have to satisfy many requirements on equity and future profit, and for enterprises planning to list shares on the bourse, requirements are even stricter.

Nguyen Hong Mai, general director of the Tam Anh Financials Co., Ltd., said if a company is eyeing an IPO, its management must ensure its readiness to make the business transparent to outsiders regarding technology, personnel and financial status. In addition, defining the expected share value is key because investors will not invest in assets that have no future, Mai said.

Huynh Kim Tuoc, director of the Saigon Innovation Hub, said the IPO is a prerequisite for startups if they want to expand scale, increase the value and access low-cost capital sources. The Saigon Innovation Hub plans to build an academy in order to help startups launch IPOs in the next three years, Tuoc said.

An IPO is not a simple journey but it is the first significant stage in the growth of many businesses.

Ngoc Thao