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SINGAPORE, May 15 (Reuters Breakingviews) - Pham Nhat Vuong is arriving in the United States in so-so 2021 style. Vietnam’s richest man is taking his electric-vehicle company, VinFast, public at a punchy valuation through a merger with casino mogul Lawrence Ho’s special-purpose acquisition company. It values the group at $27 billion and secures it a listing in the U.S. where the money-losing entity wants to sell more vehicles. But it needs funding to grow too, and the inflated deal doesn’t help much.
VinFast made its name selling gas guzzlers in the Southeast Asian nation, where its real estate-heavy parent Vingroup (VIC.HM) is the top conglomerate. Now it is heading in an entirely new direction by turning the carmaker fully electric, and taking its brand global. The tie-up with Black Spade Acquisition Co (BSAQ.N) means VinFast doesn’t have to wait for the market for initial public offerings to improve to make its debut. It can also postpone the hard sell to global investors on Vietnam as the country carries on a corruption crackdown that’s rattling the property sector and domestic stocks.
The SPAC deal values VinFast at 42 times its sales in 2022, a stunning seven times Tesla’s (TSLA.O) multiple and more than twice the multiple of Lucid (LCID.O). The high multiple is a headscratcher; the Vietnamese company’s top line shrunk 7% in 2022 and it is suffering from production delays and a turnover of senior executives. What’s more, getting onto a fast-growth trajectory looks hard at a time when the wider industry is struggling; Tesla is cutting prices of its flagship models to boost sales.
The biggest disappointment perhaps is that meagre amount of hard funding the deal brings. Ho’s SPAC brings just $169 million of capital to the target assuming no investors pull out. When Lucid and others went public stateside via similar deals in 2021, they received an extra boost through private investments in public equity wherein A-list institutions and sovereign funds pumped in cash and effectively endorsed the valuations: Grab for example raised $4.5 billion that way when it was valued at nearly $40 billion.
VinFast isn’t too desperate. In April it secured $2.5 billion in pledges from its parent and the founder himself. But despite the big eye-catching U.S. debut, existing investors will own 99% of the company after the deal. The Vietnamese electric-vehicle maker is left almost as reliant on itself as it was before.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
CONTEXT NEWS
VinFast, the electric-vehicle unit of Vietnam’s largest conglomerate, Vingroup, has agreed to list in the United States through a merger with a Hong Kong-based special purpose acquisition company Black Spade Acquisition Co, both companies said on May 12.
The merger values the Tesla challenger’s equity at $23 billion, not including the $169 million of Black Spade’s cash, and its enterprise including debt at about $27 billion.
VinFast, founded in 2017, aims to export a portfolio of e-SUVs, e-scooters and e-buses across Vietnam, North America and Europe.
Black Spade was founded by the private investment arm of Lawrence Ho. The billionaire is the chairman of Hong Kong-listed Melco International Development, which operates casinos in Macau and the Philippines.
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