Analyzing Xanh SM’s IPO Structure in Hong Kong: Governance Leverage Techniques and the FOL Compliance Puzzle
The recent establishment of Xanh SM Holding has sparked lively discussions within legal and financial advisory circles regarding the IPO roadmap on the Hong Kong Stock Exchange (HKEX) for this green-mobility “unicorn.”
Based on the current ownership structure (Vingroup and the Chairman’s family holding approximately 70%), the core question is: To whom does the remaining 30% belong, and what transaction structure will be applied to take this enterprise global? Will the market witness a recurrence of the VIE (Variable Interest Entity) structure—a model previously utilized by VNG—or will it be a complex variation of Share Swap/P-Notes, similar to the VinFast precedent?
1. Predicting Capital Flow Structure Scenarios: Optimization Between SPV and VIE via Xanh SM’s IPO Structure
If the ultimate goal is listing Xanh SM via an IPO in Hong Kong, the enterprise must solve the puzzle of the 49% Foreign Ownership Limit (FOL) in Vietnam’s passenger transport sector. To overcome this barrier, it is highly likely that a Special Purpose Vehicle (SPV) based in Singapore or Hong Kong will be established with a complex structural roadmap:
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Ownership Separation at GSM Vietnam: The SPV will hold the maximum direct stake (likely at 49%) in the operating company (GSM Vietnam). This helps GSM Vietnam maintain its status as a “domestic enterprise,” ensuring the validity of core taxi business licenses.
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Dual-Class Shares at Xanh SM Holding: This is an extremely sophisticated governance leverage technique. Charter capital could be divided into two tiers:
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(i) 35% Common Shares: Holding 100% of voting rights, intended for transfer to the SPV to position it as the parent company.
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(ii) 65% Preferred Shares: Holding the majority of economic interests (subject to certain conditions) belonging to the Vietnamese shareholder group. Per the roadmap, the maximum economic interest will be transferred to the SPV following M&A Approval and Merger Filing Clearance from the National Competition Commission.
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Indirect Holding Mechanism: By owning 30-49% of Xanh SM Holding, the SPV can indirectly regulate the economic benefits of the entire ecosystem without violating the foreign ownership cap.
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VIE Linkage (Control Agreements): To seal the structure, a system of management contracts, technology licensing, and call options will be executed. The objective is to shift all economic benefits from the operating entity in Vietnam to the offshore Holding. Consequently, international investors on the HKEX will purchase “beneficial rights” rather than direct assets in Vietnam.
2. Consolidation of Financial Statements (IFRS 10) and Listing Requirements Based on Xanh SM’s IPO Structure
The structure above is fundamentally qualified to establish a Parent-Subsidiary relationship for listing purposes. Under IFRS 10 international accounting standards, an entity (SPV) is considered a parent company if it meets three criteria: power over the investee, exposure to variable returns, and the ability to use its power to affect those returns.
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At Xanh SM Holding: The SPV holds only 35% of the capital but captures 100% of voting rights. This grants the SPV absolute power to appoint the Board of Directors and determine strategy. If the 65% preferred shares held by Vietnamese shareholders are Non-voting shares, the SPV fully establishes itself as the Parent Company in terms of governance.
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At GSM Vietnam: The SPV directly holds 49% of common shares. The remaining 51% is held by Xanh SM Holding. By controlling Xanh SM Holding, the SPV indirectly controls this 51%, raising total voting rights to 100%.
However, lawyers and independent auditors will require clarification on the risk of “economic interest leakage.” To list, the SPV (Listing Co) must consolidate financial statements. In this structure, despite holding 100% voting rights, the SPV’s “Economic Interest” is significantly diluted (only 35% in Holding and approximately 67% in GSM Vietnam). Rigorous international exchanges like the HKEX often require the listed company to retain the majority of economic interests to ensure stock attractiveness to investors.
3. Defining the Nature of the 65% Preferred Shares: The Boundary of Control
A critical point that international legal advisors will scrutinize closely is the nature of the 65% preferred shares regarding Xanh SM’s IPO Structure. To be approved by the HKEX, the advisory team must prove that the SPV has absolute “full operational control.” This means that the 65% preferred shares cannot be accompanied by veto rights that hinder essential decisions such as asset sales, mergers, or changes in business lines. If domestic shareholders have overly deep intervention rights, the SPV’s control will be deemed invalid for listing purposes.
4. Legal Challenges Ahead for Xanh SM’s IPO Structure
Beyond the ingenuity of the FOL-evasion technique, the roadmap for Xanh SM’s IPO structure will face significant legal barriers:
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Cross-border Cash Flow Monitoring: Profit repatriation in the form of service/consulting fees via the VIE model is under strict scrutiny by regulatory bodies concerning anti-transfer pricing and foreign exchange control.
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Investor Risk Appetite: Following legal volatility involving Chinese companies using VIE structures (such as Didi), investors on the HKEX have become extremely cautious regarding the sustainability of this model.
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Legal Due Diligence Timeline: The enterprise will spend considerable time on M&A approval procedures and Merger Filings in Vietnam.
If all legal structures are set up perfectly and pass rigorous vetting rounds, experts predict that as early as September or December 2026, we may see Xanh SM successfully ringing the bell on the Hong Kong Stock Exchange.
Professional Perspective P/s: It is certain that the Vietnamese Legal Counsel team “entrusted” with this deal will face an incredibly high-pressure journey. The volume of Transaction Documents and economic contracts required to complete this Xanh SM IPO Structure is enormous, demanding extreme sophistication to ensure both enforceability and the optimization of benefits for the Issuer.
Let us wait and see the next “move” by billionaire PNV on the international financial chessboard.
Contact IVLF Advisors LLC If your enterprise is seeking in-depth legal support regarding international capital market advisory, particularly concerning international IPOs, foreign investment, or restructuring, our team is always ready to accompany you.
IVLF Advisors LLC
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Core Services: M&A Advisory, Capital Markets (IPOs and Bonds), Cross-border Financial Structuring, Business Establishment (FDI).
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Contact: info@ivlf-advisors.com / (+84) 936 726 065
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Address: House R1.7, Eden Rose Urban Area, Alley 908 Kim Giang, Thanh Liet Ward, Hanoi, Vietnam.
