May 15, 2023
VinFast electric vehicles are parked before delivery to their first customers at a store in Los Angeles, California, U.S., March 1, 2023. REUTERS/Lisa Baertlein
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 expand. 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) valuation and more than twice the multiple of Lucid (LCID.O). The high number 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.
Follow @anshumandaga on Twitter
(The author is a
Reuters Breakingviews columnist. The opinions expressed are their 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.
Editing by Una Galani
and Thomas Shum
https://www.reuters.com/breakingviews/vietnams-tesla-debuts-with-wrong-kind-power-2023-05-15/
Black
Spade Acquisition Co Announces Pricing of $150 Million Initial Public Offering
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