Decoding the reason many Vietnamese startups set up holding companies in Singapore: Coc Coc, Base, Luxstay… and the latest is Tiki

Tiki Global, a new company established in May 2021 in Singapore, is expected to receive a 90.5% stake in Ti Ki JSC (the operator of the Tiki e-commerce platform) after the company issues more shares. shares in the form of a private placement.

Tiki’s charter capital is currently at VND 230 billion, of which foreign shareholders own 49.4% of the shares. The two major internal shareholders are Mr. Tran Ngoc Thai Son (Founder and CEO) holding 20.1% and VNG JSC (tech unicorn) holding 20.2%.

Before Tiki, many Vietnamese technology startups set up holding companies (holdco) in foreign countries (usually Singapore, Hong Kong) and then invested in domestic legal entities.

For example, the investment fund Ficus Asia Investment was founded by Mr. Dinh Anh Huan (one of the co-founders of Mobile World). Through the multi-layered structure of Seedcom Group and Seedcom, Ficus indirectly invests in many businesses in Vietnam such as The Coffee House, Haravan, Juno, Hnoss. At the end of 2020, Ficus raised $50 million from EWTP Capital, an investment fund backed by Alibaba and Jack Ma’s Ant Financial.

Mr. Dinh Anh Huan and Mr. Tran Ngoc Thai Son (far right)

Mr. Dinh Anh Huan himself is one of the close friends of Mr. Tran Ngoc Thai Son – CEO of Tiki. An interesting detail is that Tiki Global and Ficus Asia Investment are both headquartered at the Intenational Plaza building, 10 Anson Road, Singapore. This location is also the headquarters of the owner of Coc Coc.

In addition to Ficus, many other cases using the holding structure located in Singapore include: Vntrip OTA, Base, Luxstay, Telio, Topica…

Information about the owner of Coc Coc and Luxstay

From the point of view of a venture capital fund manager in Vietnam, there are 3 main reasons for startups to set up holding companies in Singapore:

First, the company wants to operate in multiple markets. The case of Grab from Malaysia also set up a holdco in Singapore (Grab Holdings) to operate throughout Southeast Asia.

Second, at the request of the investor, as many large investors prefer the legal conditions in Singapore compared to Vietnam. In addition, the tax policy in Singapore is very good with a capital gain of 0% compared to 20% in Vietnam.

Third, when the company intends to list on major exchanges, or markets such as Hong Kong, the US, then it will also restructure to Singapore…

According to Mr. Nguyen Thanh Hoa, a lawyer at KPMG Law Firm, Limited: (i) the opportunity to “call for capital” in Singapore and Hong Kong is more open when there are many investment funds/investors, investment procedures ( especially for foreign investors) easier; (ii) exit/divestment is beneficial in terms of transfer tax because these two countries have lower tax rates than Vietnam.

The KPMG representative added that the ability of companies to access loans from foreign banks can also be easier than borrowing capital in Vietnam…

With many favorable conditions, many global corporations have established subsidiaries in Singapore/Hong Kong, using this as a hub for business in the Asia-Pacific region.

The case of Thai Beverage (Thailand) can be taken as an example. The company’s Vietnam business is operated through BeerCo Limited (headquartered in Hong Kong).

The way that ThaiBev organizes the Vietnamese market through BeerCo

Returning to Tiki, the view of the director of another venture fund said that the “surprise” move to transfer shares to holdco in Singapore may be to make it easier for the IPO, especially when IPO conditions and listing in Vietnam is difficult. Mr. Tran Ngoc Thai Son himself also mentioned this and wanted the State to ease the conditions on the stock exchange for retail technology companies.

In fact, Tiki is deploying capital mobilization through many channels, raising capital in rounds or even issuing corporate bonds to have resources for business activities.

According to the director of this fund, raising a capital round of about 100 million USD sometimes takes 1-2 years. This is too long for a fast-growing and competitive market like e-commerce, so it could cause them to lose all of their market share. Tiki is currently far behind both Shopee and Lazada in the battle of “burning money”, these are all foreign companies with strong financial potential. Shopee belongs to SEA Group and Lazada belongs to Alibaba.

One of the options that Tiki can consider beyond the IPO and traditional listing is to merge with a Special Purpose Acquisition Company (SPAC), one of the trends that has blossomed over the past year and a half across the world. bridge.