RALEIGH – VinFast recently updated its investment prospectus – including risks – for potential investors in the proposed merger worth as much as $23 billion with Black Spade and an ensuing stock offering. That’s not uncommon. Companies do when discussing investments. But …
These risks include some issues the Vietnam-based company has already been dealing with – from critical reviews to financial losses, battery fires, a vehicle recall and more.
Black Spade shareholders approved the merger Thursday. VinFast has said the offering will come sometime in the coming months – before year’s end. In the merger announcement made today, however, VinFast said the stock of the combined company will begin trading within a few days.
But let’s take a look at the risk list.
Beginning with the merger itself, VinFast laid out pages of risks numbering in the thousands of words just after the company broke ground for a huge manufacturing plant in Chatham County.
Here are the risks as VinFast indicated in bold face. The financial performance of the company is reprinted in whole.
The details with each other bulleted point can be found in the prospectus.
However, VinFast also says the “risks and uncertainties are not the only ones that VinFast faces.”
Here’s the list:
- VinFast is a growth stage company that has a history of losses, negative cash flows from operating activities and negative working capital.
VinFast had net losses of VND32,219.0 billion, VND49,848.9 billion ($2,112.2 million), VND9,660.3 billion and VND14,120.8 billion ($598.3 million) in 2021, 2022 and the three months ended March 31, 2022 and 2023, respectively. VinFast had net cash flows used in operating activities of VND28,969.1 billion, VND35,628.4 billion ($1,509.7 million), VND9,168.1 billion and VND19,159.1 billion ($811.8 million) in 2021, 2022 and the three months ended March 31, 2022 and 2023, respectively. VinFast expects to continue to incur operating and net losses in the near term as it scales the production of its VF e34 (C-segment), VF 5 (A-segment), VF 6 (B-segment), VF 7 (C-segment), VF 8 (D-segment), VF 9 (E-segment) and VF 3 (mini cars segment) vehicles, establish its manufacturing operations and expand its marketing, sales and service network in its target markets outside of Vietnam.
VinFast’s ability to achieve profitability, positive cash flows from operating activities and a net working capital surplus will depend on many factors, including its ability to achieve commercial acceptance, increase utilization of its production capacity to produce EVs in large quantities as planned and increase sales of its EVs in its target markets beyond Vietnam where its operations have historically been focused, including the U.S., Canada, France, Germany, the Netherlands and, in the long-term, elsewhere in Asia and Europe and other factors discussed in this “Risk Factors” section.
Vingroup has issued support letters in connection with the audit of VinFast’s 2021 and 2022 financial statements and the review of VinFast’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2023 to the effect that Vingroup has the ability and will continue to provide financial support sufficient to meet VinFast’s need for continued operation, subject to necessary procedures to facilitate such support. VinFast’s financial statements have been issued on a going concern basis taking into consideration the support letters, its business plan and the cash and cash equivalents held by its group. The latest support letter is valid from the issuance date of VinFast’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2023, until the earliest of the date on which VinFast obtains adequate third party funding for its capital requirements or the date on which Vingroup ceases to control VinFast, but in all cases no sooner than the date falling 12 months after the issuance date of the unaudited consolidated interim condensed financial statements for three months ended March 31, 2023.
The other items
- VinFast will require significant additional capital to support business growth. VinFast expects to fund its capital requirements through additional debt and equity financing, including related party financing. Such capital might not be available on commercially reasonable terms, or at all, and could, among other things, be burdensome and lead to dilution of your shareholding in VinFast.
- VinFast faces risks associated with being a new entrant in the EV industry and the marketing and sale of its EVs in international markets where it only recently began delivering vehicles.
- VinFast’s brand, reputation, public credibility and consumer confidence in its business could be harmed by negative publicity, and VinFast may not succeed in growing its brand in markets outside Vietnam.
- VinFast’s long-term results depend upon its ability to successfully introduce and market new products and services, which may expose VinFast to new and increased challenges and risks.
- The automotive market is highly competitive, and VinFast may not be successful in competing in this industry.
- VinFast’s markets its EVs in multiple markets that use different driving range testing standards while its EVs are in different stages of development. In addition, the driving range and overall performance of VinFast’s EVs will depend on many factors beyond VinFast’s control, including driving habits and conditions. Therefore, the advertised driving range, certified driving range and actual driving performance of VinFast’s EVs may all differ. As a result, VinFast may be subject to negative publicity, and its business may be adversely affected even if such press is inaccurate.
- VinFast may be unable to adequately control the costs associated with its operations.
- VinFast’s historical results of operations are not, and its past growth may not, be indicative of its future performance or prospects.
- VinFast is dependent, directly and indirectly, on suppliers for component parts and raw materials. Suppliers may fail to deliver components and raw materials according to VinFast’s schedule and at prices, quality and volumes acceptable to it.
- VinFast’s success will be dependent upon its ability to maintain relationships with existing suppliers who are critical and necessary to the output and production of its vehicles and to create relationships with new suppliers.
- The process of establishing manufacturing facilities outside of Vietnam, and expanding VinFast’s capacity within Vietnam, may be subject to delays or cost overruns, may not produce expected benefits or may cause it to not meet its projections for future production capacity.
- VinFast’s reservations may not result in completed sales of its vehicles and its actual vehicle sales and revenue generated for their sales could differ materially from the number of reservations received.
- VinFast’s future growth is dependent on the demand for, and upon consumers’ willingness to adopt EVs, which may be affected by various factors, including developments in EV or alternative fuel technology.
- If there is inadequate access to EV charging stations or related infrastructure, VinFast’s business may be materially and adversely affected.
- The unavailability, reduction or elimination of government and economic incentives or government policies which are favorable for EV manufacturers and buyers could have a material adverse effect on VinFast’s business, financial condition, results of operations, cash flows and prospects.
- If VinFast fails to maintain an effective system of internal control over financial reporting in the future, it may not be able to accurately and timely report its financial condition, results of operations or cash flows, which may adversely affect investor confidence.
- VinFast has identified material weaknesses in its internal control over financial reporting. If VinFast’s remediation of such material weaknesses is not effective, or if it experiences additional material weaknesses in the future or otherwise fail to develop and maintain effective internal control over financial reporting, its ability to produce timely and accurate financial statements and comply with applicable laws and regulations could be impaired.
- VinFast’s vehicles currently make use of lithium-ion battery cells; lithium-ion battery cells have been observed to catch fire or vent smoke and flame.
- VinFast collaborate with a range of third parties, including for certain business partners for key aspects of its business, and any failure of these partners to deliver their services adequately will adversely impact its business, operations, reputation, results of operations and prospects.
- VinFast may experience issues with the recycling of its lithium-ion cells and battery modules, which may harm its business and reputation.
- VinFast’s research and development efforts may not yield expected results.
- VinFast’s vehicles rely on software and hardware that is highly technical, and if these systems contain errors, bugs, vulnerabilities, or design defects, or if VinFast is unsuccessful in addressing or mitigating technical limitations in its systems, or if it is unable to coordinate with vendor and suppliers in a timely and effective manner, its business could be adversely affected.
- VinFast’s warranty reserves may be insufficient to cover future warranty claims, which could adversely affect its business, financial condition, results of operations, cash flows and prospects.
- If VinFast’s vehicle owners customize its vehicles with aftermarket products, or attempt to modify its vehicles’ charging systems, the vehicles may not operate properly, which may create negative publicity and could harm VinFast’s brand and business.
- VinFast may be subject to risks associated with autonomous driving technologies.
- VinFast’s business depends on the continued efforts of its people and its ability to recruit new talent and its operations may be disrupted if it loses their services.
- VinFast may be compelled to undertake product recalls or other actions, which could adversely affect its reputation and brand, and its business, financial condition, results of operations, cash flows and prospects.
- Pandemics and epidemics, natural disasters, terrorist activities, political unrest and other geopolitical risks could disrupt VinFast’s production, delivery, and operations, which could materially and adversely affect its business, financial condition, results of operations, cash flows and prospects.
- VinFast will be subject to risks associated with foreign exchange rate fluctuations and interest rate changes.