What does the chairman of VinFast say about the $4.7 billion loss on the IPO prospectus?

According to Ms. Le Thi Thu Thuy, the $4.7 billion figure does not reflect the actual loss of VinFast. Differences in accounting principles between the US and Vietnam lead to different results.

Ms. Le Thi Thu Thuy, Chairman of VinFast and Vice President of Vingroup has just shared about VinFast’s IPO prospects.

– Can you tell me why VinFast decided to IPO in the midst of a gloomy world market?

The world market is forecasted to recover in 2023. Therefore, IPO at this time is appropriate to catch the wave of recovery and breakthrough. On the side of VinFast, the sooner the IPO, the faster it creates the impetus to grow to a global scale as the set goal.

– As a rookie, the brand that is not yet familiar to international consumers, VinFast Where do you rely to be confident? upcoming IPO prospects, ma’am?

VinFast is a company with a very fast growth rate. Although we have only entered the market for 5 years, we have successfully built a modern car company, completely mastering the product development, supply chain and manufacturing processes, bringing to market a wide range of vehicles. top of the participating segment. VinFast’s partners are all leading names of the world auto industry such as ZF, Durr, Bosch, ABB, Pininfarina….

Most recently, VinFast exported the first batch of electric vehicles to the US, less than a year after announcing the pure electric strategy, confirming the strong deployment capacity of the business.

– So what are your expectations about the upcoming IPO prospect?

VinFast’s goal is to successfully list in the US to move towards greater opportunities, creating momentum for VinFast to develop on a global scale.

– Back to the IPO story, in VinFast’s prospectus filed with the SEC has accumulated losses of nearly $4.7 billion as of September 30, 2022. How are you, ma’am?

Not all of the $4.7 billion figure is a true reflection of VinFast’s actual loss. Differences in accounting principles between the US and Vietnam lead to different results. For example, the alleged loss – 1.879 billion USD – is actually research and development (R&D) costs for VinFast models.

According to Vietnamese accounting standards, most of these costs are counted as long-term investments of the business and will be amortized over the life of the product. However, when applying US accounting standards (US GAAP), these amounts are accounted as expenses as soon as they are incurred, leading to accumulated losses being increased.

In addition, of the remaining total loss, about 690 million USD is depreciation expense. For businesses, this is not considered a loss, but rather part of the initial investment.

– So how do you explain the debt of up to $ 8.8 billion, of which short-term debt is $ 5.3 billion and long-term debt is $ 3.5 billion of VinFast in the prospectus?

In essence, not all of this $8.8 billion is debt, in particular, there are some liabilities that are not debt. For example, there is $ 2.092 billion in payables arising from internal ownership restructuring transactions so that VinFast Singapore can list in the US.

After the IPO is successful, this payable will be settled between the companies in the group and VinFast will no longer have to bear this obligation. In other words, this $ 2.092 billion is not debt but just an internal structure for the purpose of restructuring for the IPO.

As another example, in this total “debt”, there is also 603 million USD which is the obligation to pay for the transaction of transferring the factory part (excluding machinery and equipment) to Vinhomes Industrial Real Estate Investment Company (“VHIZ”). “).

This transfer is to restructure business activities to be consistent with the general plan on industry structure among member companies of Vingroup. Accordingly, VHIZ is the only company operating in the field of industrial real estate development and exploitation.

With this amount, VinFast has actually received payment for the transfer of the factory from VHIZ and is making periodic rental payments to VHIZ under a long-term lease. Accordingly, the amount received from VHIZ from the transfer of the factory is accounted as a future payable under the form of long-term lease for many years.

Thus, if removing the above two payables without the debt element, the remaining total payable of VinFast is $6.1 billion; in which debt to credit institutions is 3.077 billion USD, internal loan is 1.313 billion USD, the rest are payables arising during operation and are balanced with other receivables.

– As you have just analyzed, is VinFast fully qualified to confidently step out into the global playing field?

That’s right, we are fully confident of our financial health to go out into the world. This will be a great opportunity for VinFast to increase its scale and level to become a global electric car company, contributing to promoting the future of mobility.

– Thank you ma’am!