The Opportunity To Invest, Initial Public Offering & Market In Vietnam
Re-write in 4 -5 pages
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.
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 i
