Vietnam’s VNG considers private placement prior to Nasdaq IPO: Sources

The scene of Nasdaq and VNG executives signing the MoU shown on Nasdaq Tower. Image: Nasdaq

Vietnamese Internet group VNG Corporation is looking at institutional and strategic investors for a private placement ahead of its planned listing on the Nasdaq Stock Market, two industry executives aware of the development told this portal.

VNG Corp, that is reportedly backed by Tencent, Goldman Sachs Group Inc as well as Singapore’s Sovereign wealth fund GIC, among others, had announced last month that it had signed a memorandum of understanding to list on the Nasdaq Stock Market, while adding that the process could take up 18 to 24 months.

While talks for a private placement are at a very early stage, one of the executives linked to a private equity firm said the pre-IPO placement could be made to existing investors including Goldman Sachs, Tencent and GIC, and could also include new investors such as private equity major Warburg Pincus, among others, and added that a successful pre-IPO private placement could reduce the IPO size.

However, the company is yet to kick off the formal process for the private placement, and has not sought board approval yet for this move, this portal has learnt.

But when contacted, the company denied the development and said it had no plans for private placements of its shares.

Last month, Bloomberg in a report, confirmed the industry buzz that Sea Ltd, formerly called Garena, and is Southeast Asia’s most valuable startup, has filed confidentially with the US Securities and Exchange Commission, for a potential US initial public offering that could raise about $1 billion. The report quoted people familiar with the development, and if Sea were to list, it will be the largest technology IPO from Southeast Asia.

Garena, which was founded by Taiwanese entrepreneur Forrest Li, and began as an online gaming portal, is reported to command a valuation of over $4 billion currently, and now offers a slew of services including mobile payments and e-commerce.

Sea had recently raised $550 million in a Series E round from the likes of Farallon Capital ManagementHillhouse CapitalCathay Financial Holding Co. and President International Development Corporation, an investment arm of Taiwanese food conglomerate Uni-President Enterprises Corp. Other backers of Garena include the likes of Tencent HoldingsKeytone VenturesKhazanah Nasional BhdGeneral Atlantic and Ontario Teachers’ Pension Plan. Its investors also include GDP Venture, led by Martin Hartono, and JG Summit Holdings Inc., founded by John Gokongwei.

Some market watchers view its latest Series E round to be equivalent to a pre-IPO placement.

VNG too had started out as a gaming startup in 2004, and the company is also recognised as Southeast Asia’s first tech unicorn.

It has not provided any details for its proposed listing in the US, but had only said that Nasdaq could be helping it prepare for the listing. Currently, foreign investors, in total, hold around 44.6% in VNG, and is below Vietnam’s foreign ownership cap of 49%.

The Vietnamese IT major, that is a competitor to SEA (Garena), has followed a strategy that has been similar to that adopted by Tencent, which was to begin as a gaming companies, before branching out to other sectors such as digital content, chat, payments, and ecommerce.

Incidentally, both VNG and Sea (Garena) have China’s Tencent as their shareholders.

VNG is also planning to issue 632,000 ESOP shares in 2017, adding to the amount issued to its employees (which stands at around 3.21 million since 2013).

The American stock exchange, in a statement earlier this month, said it would “work closely with VNG to prepare for its listing on Nasdaq and support VNG’s access to the US capital markets”.

The proposed IPO would make VNG the first firm from Vietnam to list overseas. The company’s agreement with Nasdaq was signed on May 29 on the sidelines of Vietnam Prime Minister Nguyen Xuan Phuc’s visit to the US.

“Vietnam is one of the most attractive market in Asia Pacific, being among the top 20 countries in terms of Internet population. With our experience since the Internet started to develop in Vietnam, VNG is willing to be the bridge for anyone interest in this market,” VNG said in an email interaction. While the company acknowledged that there were challenges in listing in an overseas market, it added that was the “right time for VNG to start listing on an international market”.

“In 2017, VNG takes a new challenge to be a global company. And listing in an international market can be a comprehensive measure for evaluating a company,” its email statement added.

VNG posted a revenue of VND3 trillion in 2016, increasing 45 per cent year-on-year. Profit after tax in the fiscal saw a whopping jump of 135 per cent to reach over VND543 billion.

This year’s revenue is also expected to significantly increase to VND908 billion ($40 million). The company said its shareholders had approved the proposal, whereby its main focus in 2017 would be be international expansion by boosting investment into its business verticals, reaching new markets and acquiring more users.

Also read: Nasdaq-bound VNG Corporation set for Vietnam’s first overseas listing