You will soon be able to buy VinFast stock. But it’s taking a different path to market.

VinFast is approaching the stock market, and the Vietnamese automaker has taken an unusual route to get there.

Instead of filing for a traditional initial public offering, as the company originally intended, VinFast is poised to go public through a special purpose acquisition company, or SPAC.

A SPAC, also known as blank check company, is a publicly traded shell entity that serves as a channel for a private company to gain a public listing. In May, VinFast announced it would merge with a Hong Kong-based SPAC called Black Spade.

On Aug. 10, Black Spade shareholders are expected to approve the merger, allowing VinFast to acquire public status. The U.S. Securities and Exchange Commission green lit the proposed combination late last month.

It is one of the largest SPAC deals ever, valuing the 6-year-old VinFast at $23 billion. Company officials anticipate the listing will be finalized by the end of August.

One of the reasons companies go public is to raise capital. However, despite seeking additional funds to finish its promised $4 billion electric vehicle factory in Chatham County, the North Carolina-bound VinFast is not positioned to generate significant money from its SPAC deal — at least not in the short term.

Black Spade, which is listed on the New York Stock Exchange, comes to the merger with around $169 million in cash. Before it combines with VinFast, its shareholders have the option to redeem their shares. Those who don’t redeem shares will go on to hold VinFast stock at its $23 billion valuation, which is roughly the market capitalizations of established brands like eBay, M&T Bank and Michelin.

VinFast on the other hand is a relatively new company that is just beginning to deliver its electric SUV models worldwide. Initial reviews for its five-seat model have been mostly poor.

“(The valuation is) hard to justify,” said Jay Ritter, a finance professor at the University of Florida’s Warrington College of Business.

Redemption rate high

Already, more than 80% of Black Spade shareholders have redeemed, leaving the SPAC with approximately $28.56 million in assets. SPAC experts say this amount will further dwindle as redemption rates likely exceed 99%.

“I suspect that essentially all currently public investors will redeem,” said Michael Ohlrogge, an associate professor at the New York University School of Law.

What remains would be a sizable sum to most individuals, but not for an emerging company that has lost around $4 billion since 2021. Ohlrogge said there’s a “good chance” reaching the stock market will initially cost VinFast money.

“It’s not all that uncommon for this to happen in SPAC mergers — total bank fees are greater than total proceeds delivered in the merger,” he said.

This prospect has not deterred VinFast.

In May, a company spokesperson told The News & Observer that a SPAC affords the carmaker a U.S. public listing “without the need to simultaneously raise substantial amounts of capital from investors.”

Instant access to public fundraising

Being traded on the stock market will also give VinFast instant access to public fundraising. In a July 28 statement, VinFast CEO Le Thi Thu Thuy noted the SPAC deal will open “a strategic capital-raising avenue for our global ambitions.”

As recently as 2020, VinFast exclusively sold gas-powered cars in its home country. Since then, the company has pivoted. Within a few years, it hopes to be selling hundreds of thousands of electric vehicles to drivers around the world.

VinFast is following other electric vehicle companies like Lucid and Nikola that have merged with SPACs. Yet its choice is unique in terms of timing.

Black Spade formed in 2021 at the height of a recent SPAC boom. That year, a record 613 SPACs launched. So far in 2023, the number of deals is only 21 as the performance of recent SPAC deals — along with the specter of stricter federal regulations — have deflated the once hot practice.

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