Systemic problems in auctioning shares of State-owned enterprise (SOE) Vinamilk recently should serve as a lesson for upcoming equitising transactions, a Finance Ministry official says.

Dang Quyet Tien, deputy head of the Ministry of Finance (MoF)’s Enterprise Finance Department, attributed the problems to the lack of a clear governmental framework on SOE divestment, especially for foreign investors.

Another factor was the lack of time, as the initial public offering (IPO) had taken place during the holiday season for foreign investors, he said.

A more confusing part of the auction for foreign investors also lay in rules that differed from the global norm, like requiring a deposit of 10 per cent of the value of purchased stocks. Furthermore, the deposit scheme involving dollars had made it difficult for foreign investors inexperienced in Viet Nam to register their purchase, ultimately reducing their interest in Vinamilk’s offering.

He said upcoming IPOs for other SOEs must be better prepared to avoid such shortcomings, most importantly during the promotional phase as not to cause misunderstandings about pricing among investors.

Tien’s comments were made at a conference held by the finance ministry in Ha Noi last Friday to review results of national equity divestments from 2011 to 2015.

Market responses should also be collected and reported back to corresponding government agencies for diagnosis towards coming up with more flexible equitisation and divestment procedures in accordance with world standards, he said.

However, he also said that the company had made the right choice to only sell 9 per cent of its charter capital, as the time limit would not allow for more. At the same time, the price of VND144,000 per share (US$6.5) matched Vinamilk’s value, whereas the market price had been fluctuating below the price set by the company and could have easily been influenced by large buyers.

Tien suggested that similar transactions had been done abroad using the book building method, which is a process of generating, capturing, and recording investor demand for shares during an IPO, instead of the auction method. Book building supported efficient price discovery and better suited the needs of large organisations as investors because its procedures are simple and information is secure.

Lessons from Vinamilk’s IPO should be used in future for other major listed companies such as the Hanoi Beer Alcohol and Beverage Joint Stock Corporation or the Saigon Alcohol Beer and Beverages Corporation, he said.

Despite anticipation from stockholders and a positive forecast by the State Capital Investment Corporation (SCIC), Vinamilk finished its auction on December 12, 2016 with only 78.4 million of the 130.6 million shares on offer sold, equaling 9 per cent of the company’s total charter capital.

Only two major foreign buyers registered beforehand to purchase stocks from Vinamilk’s IPO. Both funds belonged to Thai billionaire Charoen Sirivadhanabhakdi, already a stakeholder in the company. — VNS