Vietnam’s Tesla debuts with the wrong kind of power

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 hefty valuation through a merger with casino mogul Lawrence Ho’s special buyout company. It values ​​the group at $27 billion and secures a listing in the US where the money-losing unit wants to expand. But it needs funding to grow as well, and the bloated deal isn̵[ads1]7;t helping much.

VinFast made its name selling gas guzzlers in the Southeast Asian nation, where property-heavy parent company Vingroup ( VIC.HM ) is the top conglomerate. Now it is going in a completely new direction by making the automaker fully electric and taking the brand global. The tie-up with Black Spade Acquisition Co ( BSAQ.N ) means VinFast doesn’t have to wait for the market for IPOs to improve to make its debut. It could also delay the hard sell of global investors in Vietnam as the country carries out a corruption crackdown that is ravaging the real estate sector and domestic stocks.

The SPAC deal values ​​VinFast at 42 times its 2022 sales, an impressive seven times Tesla’s ( TSLA.O ) value and more than twice that of Lucid ( LCID.O ). The high number is a headscratcher; the Vietnamese company’s top line shrank 7% in 2022, and it is suffering from production delays and a turnover of top executives. Moreover, getting on a path of rapid growth at a time when the wider industry is struggling looks difficult; Tesla is cutting prices on its flagship models to boost sales.

Perhaps the biggest disappointment is the meager amount of hard financing the deal entails. Ho’s SPAC brings just $169 million in capital to the target assuming no investors pull out. When Lucid and others went public state-side via similar deals in 2021, they got an extra boost through private investments in public stocks where A-list institutions and sovereign wealth funds pumped in cash and effectively propped up valuations: Grab, for example, raised $4.5 billion that way then when it was valued at almost 40 billion dollars.

VinFast is not too desperate. In April, it secured $2.5 billion in pledges from the parent company and the founder himself. But despite the big eye-catching US debut, existing investors will own 99% of the company after the deal. The Vietnamese electric car manufacturer is almost as dependent on itself as it was before.

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CONTEXT NEWS

VinFast, the electric vehicle unit of Vietnam’s largest conglomerate Vingroup, has agreed to go public in the United States through a merger with Hong Kong-based specialty acquisition firm Black Spade Acquisition Co, both companies said on May 12.

The merger values ​​the Tesla challenger’s equity at $23 billion, not including $169 million of Black Spade’s cash, and the company’s enterprise including debt at about $27 billion.

Founded in 2017, VinFast 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 chairman of Hong Kong-listed Melco International Development, which operates casinos in Macau and the Philippines.

Editing by Thomas Shum

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