The Opportunity To Invest, Initial Public Offering & Market In Vietnam

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The Opportunity To Invest, Initial Public Offering & Market In Vietnam

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1.What are Pre-IPO Shares?

Before an IPO ( Initial public offering) which is the initial listing of shares on a financial marketand a very fist sale of stock issued by a company on the public market, a Pre-IPO is placed before IPO is scheduled to hit the market.Another way to define a pre-IPO placement is the money raised by a company before it goes public.

A pre-IPO investment is the last private fundraising round of a company before its IPO, which is planned for the short and medium term.

2.Why would a company that plans to proceed with an IPO need prior financing?

A company interested in a stock market listing must make extensive preparations generally takes between one and two years.

The companies selected by PRE-IPO are innovative companies with very strong growth strategies. They therefore invest heavily, very often far beyond their capacity for self-financing or bank borrowing. They therefore do not wish to slow or postpone investments planned over the period of preparation.

The need to significantly reinforce equity funds at the most attractive innovative European companies is very substantial, even after they have successfully completed the riskiest phases of their development and often even after they have turned profitable. These successes enable them to have high ambitions. An IPO will complete their sources of financing.

3.The market in Viet Nam

Vietnam leaped to the top of Southeast Asia’s initial public offering (IPO) ranking with five IPOs raising US$2.6 billion in 2018, CNBC reported.

Data: Ernst and Young (EY). Graphic: Hai Yen.

Domestic and foreign investors are pouring money into Vietnam, attracted by strong economic growth and a slew of sales by state-owned and private companies.

In April,2018 Singapore wealth fund GIC came in as a pre-IPO investor and took a roughly 5.74 percent stake in Vinhomes by buying shares from Vingroup and other shareholders. Vinhomes’ first-quarter net profit jumped five times from the same period last year to 3.99 trillion VND (US$177.3 million), and revenue surged three times to 10.54 trillion VND. Its share price rise 20 percent per share in its first trading session after it was officially listed on the Ho Chi Minh Stock Exchange (HoSE) on 17 May 2018 (https://www.vietnambreakingnews.com/2018/05/foreign-investors-gear-towards-vietnam).

Private lender Techcombank has also succeeded in receiving an investment of nearly US$1 billion from foreign investors, of which over US$370 million came from leading global private equity firm Warburg Pincus. As the pre-eminent private equity investor in Vietnam, this transaction brought Warburg Pincus’ total investment in Vietnam to over US$1 billion.

Foreign direct investment into Vietnam rose by 6.2 percent year-on-year to USD 4.12 billion in the first three months of 2019.

The government would like to sell their stake towards various companies, expecting to gain more funds of IPO for the next 3 years (2021), aiming the largest amount to be raised for entire Southwest Asia. Their prediction for the coming 3 years is shown below:

Figure 1: 3 Years Projections

Source: Baker McKenzie, Oxford Economics

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4/ Who have the opportunity to invest in pre-IPO?

Considering the fact that pre-IPO investments have a limited access for most investors. A pre-IPO placement only occurs with veryprivate investors who are typically large private equity which is an alternative investment class and consists of capital. In addition, the first step in the IPO process is for the issuing company to choose an investment bankd or broker dealer in advising and helping them IPO/list on the stock exchange. Therefore, the investors can access to pre-IPO investment opportunity through the Securities Corporation.

  • Reputation
  • The quality of research
  • Industry expertise
  • Distribution i.e. if the investment bank can provide the issued securities to more institutional investors or to more individual investors.
  • Prior relationship with the investment bank

5.Why invest pre-IPO?

When an investor gets in on the ground floor, they have much more to gain when a company releases their financial information, goes public, and proves themselves to be successful.

-The price paid for Pre-IPO shares is often lesser than the prospective price of the IPO.These potential capital gains come on top of the discount offered to Investors

-Investing in pre-IPO stocks is the return on investment potential. In many cases, investors who have purchased pre-IPO stocks make double or triple what investors who purchase those same stocks publicly IPO.

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6.What are the risks of accessible investment on pre IPO?

.Investing can be very profitable. However, it also involves a certain number of risks.

-in case of failure of going to public on the stock exchange or a lack of future financing lead to the bankruptcy of the company and cause the lost to investors. However, even if the company does not fail, a partial loss can result from lower share price than expected when it goes to public because some of the fators below:

ØEconomic, political or international conditions.

Ø The dynamics of financial markets

Ø The validity of the company’s strategic project

Ø The quality of the management team

-Whether the company is listed or unlisted, there is no guarantee as to the liquidity of the investment

  • Ho Chi Minh City Securities Corporation (HSC)

Ho Chi Minh’s securities corporation is a professional securities brokerage and equities in Viet Nam which is cooperated between the founding shareholder Ho Chi Minh City Finance and Investment State-owned Company (HFIC) and strategic shareholder Dragon Capital Group, a prominent and leading diversified investment group.

HSC has established in April 2003 at the time it was the 11th of the securities of the company will be established in Vietnam from the beginning HSC with a full spectrum of operations with securities and investment banking related services. HSC corporation signed a stock exchange for the year 2000. This starts the benefits that the corporation had since the stock exchanged had started which considered as the leading stock exchange in Vietnam.

HSC has become one of the largest securities companies in the country with a strong financial base and investment capacity with over 14 year- experience.

In 2018, HSC has just been honored as one of the top three public listed companies in Vietnam, and also the only securities company in Vietnam to win this award.This award is expected to bring HSC closer to the international community and increase investor’s faith.

8.Why should choose HSC as your partner?

-HSC is proud to boast teams of professional, experienced and dedicated executives, consultants and analysts.

-Leading and reputable financial corporations in the Vietnamese market. They have an extensive branch network in Vietnam. Transaction software, service systems, and employees are professional enough to provide and support foreign investors.

-Clear and strong financial situation. During recent years, their business results were quite positive.

-HSC is appreciated on both quality and quantity. Not all securities companies can maintain their objectivity on reports like HSC even large companies. And HSC’s analysts write reports in both Vietnamese and English language which is easy for foreign investors to be approached Viet Nam market.