Vietnam’s stringent rules for initial public offerings (IPOs) are discouraging enterprises, especially tech startups from going public, with experts warning that even global giants like Tesla or Amazon would have struggled to raise capital had they launched in the Southeast Asian country.

Over the past decade, not a single tech company has successfully listed on Vietnam’s stock exchanges. Experts argue it is time to reassess why many businesses are avoiding IPOs, suggesting more flexible policies -- particularly for the tech sector -- are urgently needed.

A report from SSI Asset Management highlighted Vietnam’s lag in IPO activity.

In 2024, Vietnam recorded just one IPO, compared to 41 in Indonesia and 55 in Malaysia.

That sole listing belonged to DNSE Securities, a firm that operates under a tech model but is categorized as a securities company.

Meanwhile, Vietnamese tech startups continue to look abroad.

A Vietnam-founded company went public in Japan in 2021, and unicorn VNG filed to list in the United States before later withdrawing.

Domestically, only 16 tech companies are listed -- around one percent of more than 1,600 public firms -- compared to 997 in China, 903 in Japan, 648 in South Korea, 332 in India, and 125 in Malaysia.

According to Doan Ngoc Khanh, chief of office at the Institute for Digital Economy Development Strategy, Vietnam’s stock market remains outdated and heavily concentrated in banking, real estate, and consumer goods.

He said this imbalance has hindered the VN-Index’s growth and made the market less appealing to foreign investors.

Stringent regulations

One reason for the shortage of IPOs, particularly among tech companies, is Vietnam’s strict listing criteria.

A communications software startup founder told Tuoi Tre (Youth) newspaper that although his company needs capital and has posted three consecutive years of revenue growth, it will not consider an IPO.

The firm, currently expanding to the U.S. and India, has yet to turn a profit due to high development costs.

Nguyen Ngoc Anh, CEO of SSI Asset Management, explained that current rules require companies to be profitable for two consecutive years before they can apply for an IPO.

In addition, they must have no accumulated losses at the time of registration.

These requirements, Anh noted, would have barred Tesla, whose IPO came in 2010 despite more than $2 billion in losses as late as 2017, from going public had it been based in Vietnam.

Vietnam’s IPO framework remains rigid, Anh said, making it ill-suited for innovative businesses that need significant upfront capital to expand user bases, build infrastructure, and drive innovation -- factors that often result in early-stage losses.

Other countries have moved toward more flexible systems.

China allows companies with losses to list on the STAR Market and ChiNext.

India operates the Innovators Growth Platform for similar purposes.

These relaxed requirements have encouraged more IPOs in the tech sector.

Duong Quoc Anh, former deputy head of the National Assembly’s Economic Committee, added that tech startups struggle to obtain large bank loans due to a lack of collateral.

While listing on UpCOM is an option, it fails to attract foreign investment or large institutional funds.

As a result, some companies move their business registration abroad or list in foreign markets, leading to a drain of potential capital and innovation.

In practice, many Vietnamese tech firms aim to go public in countries like the U.S. or Singapore.

Singapore, in particular, has emerged as a destination for SPAC (Special Purpose Acquisition Company) listings, offering a friendlier path for capital raising.

Nguyen Hoang Giang, chairman of DNSE, said Vietnam must seriously examine why its businesses are hesitant about IPOs.

“If the listing requirements are too strict, we need a flexible mechanism,” he said.

Vietnam’s commitment to building a digital and creative economy should include policies that reflect the unique nature of those sectors, Giang argued.

Some experts said that maintaining strict standards is essential to protect investors. They added financial transparency and sustainability are necessary for long-term market stability.

To reconcile these viewpoints, Duong Quoc Anh proposed establishing a separate stock exchange for tech startups with specialized listing rules, modeled after successful platforms in other countries.

Deloitte’s 2023 IPO report pointed to broader market challenges, including instability in Vietnam’s corporate bond market, as contributing to the overall IPO decline.

Ho Sy Hoa, director of research and investment consulting at DNSE Securities, said that increased regulatory focus on transparency and international standards has led to a short-term slowdown in listings, but could ultimately strengthen the market.

Nguyen Huu Huan, senior lecturer at the University of Economics Ho Chi Minh City, noted that many companies avoid IPOs due to the demanding shift from private ownership to joint stock company status.

That transition requires changes in corporate governance, information disclosure, and independent auditing.

Many tech companies have the potential to become global players, Huan said, but they struggle to raise capital for scaling up because of regulatory barriers.

Under Vietnam’s 2019 Securities Law, companies seeking to list on the Ho Chi Minh City or Hanoi Stock Exchanges must meet profitability and loss-free requirements for two years prior to the IPO.

These conditions effectively disqualify most startups.

A tech company executive argued that even companies like Amazon would not have been able to list under Vietnam’s current system.

Amazon posted losses for six years after its founding but was still able to initiate an IPO on NASDAQ, which does not require profitability or the elimination of accumulated losses.

This, he said, is what allowed the company to become a global leader.

“If Vietnam wants to have its own Amazon,” he said, “it should adopt a regulatory mindset that fits the realities of tech companies.”

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