only 8.09% of charter capital. Many financial investors wonder: Why are these joint stock enterprises qualified to be listed on the stock market? If according to Decree 64/2002/ND-CP, the agencies approving the share sale plan should have encouraged the units to sell 15%-20% of charter capital to the outside as prescribed, but in reality, the sale level is less than 10%. [7, pp. 1-2]
On the other hand, the way the auction is organized in reality is still very formal and has discouraged investors. For example, the case of the auction of shares of Rang Dong Light Bulb and Vacuum Flask Company. The announcement of the sale of shares was published in the newspaper on May 15, 2004, and on May 18, the registration for shares began and the registration period lasted only 2 days before it was... closed. On May 24, the bidding was opened, but May 22 and 23 were Saturday and Sunday, so investors had too little time to learn and make investment decisions. The information disclosure for investors was too sketchy. Not only did they deliberately conceal information about the organization of the auction of shares in order to limit the number of participants, many businesses also limited, or even refused, investors' registration to participate in the auction to buy shares. For example, Central Medical Equipment Company 2 (Vimec) according to Vimec's announcement in Saigon Giai Phong newspaper (issued on March 7 and 9), the auction of 5,880 initial issued shares of Vimec, equivalent to 7% of the charter capital of the new joint stock company, was held on March 11; the registration period was from 7 to 15:00 on March 9, 2004. However, according to the reflection of many investors, they were refused to register for the auction (although there was still time to register) for the reason that they were "not considered to be a "close partner" of the Company.
Some enterprises have amended the auction regulations and violated the provisions of current law (Circular 80/2002/TT-BTC). For example, Cafatex Enterprise in its share auction regulations (announced on April 6, 2004), did not have any clause or sub-clause regulating the maximum number of shares that an investor could buy. However, two days later (April 8, 2004), the "Auction Council" of this unit issued a regulation limiting the maximum number of shares that an investor could buy to 10,000 shares. [23, p. 3]
Through the above cases, it can be affirmed that there is currently a lack of transparency in the auction of shares in some enterprises undergoing equitization. Some enterprises that organize auctions of shares themselves have admitted that the reason they do not want to publicize the auction of shares is because they do not want to sell shares to the outside.
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After Decree 187 was issued, the sale of shares has been made more public through securities companies to create a vibrant atmosphere, creating a favorable environment for the public and investors to get acquainted with securities and the stock market, requiring potential investors to participate in real auctions, carefully research and analyze the information of the enterprise published to make the right decision before registering to participate in the auction. The auction of shares is made more transparent, investors can easily receive information published at securities companies that ensure the auction, such as information: the formation process, investment activities, asset structure - capital sources, business results and operation plan after converting to a joint stock company. For example, before Kinh Do Northern Joint Stock Company put up its shares for auction, the information was spread throughout the newspapers a month in advance. Investors can search for information, development plans, capital, growth status, profits, revenues, etc. through intermediary companies in Ho Chi Minh City and Hanoi. The share auction was held simultaneously at both ends of the city and directly connected. As a result, the company's shares reached the highest bid ever: 351,000 VND/share and a surplus of 14.5 billion VND after the auction.
The auction of shares through the two Hanoi Stock Exchanges and Ho Chi Minh City Stock Exchanges of the companies has achieved some initial success. In general, the winning bids of the auctions were higher than the starting price (calculated based on cash flow discount) and the par value (calculated based on asset value). This proves that the public auction has contributed to determining a price close to the true economic value of the enterprise.
e. Restrictions on shareholding ratio and strategic partnership policy
The equitization policy stipulates that a portion of shares must be sold at a preferential price to those within the enterprise, such as directors who can buy up to 30%, and directors often do not buy much for fear of revealing their assets, but instead gather forces or sell purchase rights. In the context of the "hot" stock market, investors are willing to pay in advance to buy shares, just need to "take a place", the person with the right to buy has "snapped" a difference that cannot be said to be small. The State can sell shares directly to the market at a high price, but it "creates conditions" for some subjects under the name of workers to "steal" and some subjects even steal the workers' share because how much workers are entitled to buy is decided by the enterprise's equitization board.
Some enterprises signed "strategic partnerships" between the tycoons, but because there was no effective monitoring mechanism, they could collude with each other for personal gain and in many cases this was a way to... sell State shares at a low price. In fact, some enterprises, after buying... almost all internal preferential shares, in order to "sweep" the maximum amount of shares sold outside, the director also asked another company to act as a "strategic partner" because in this case, shares were sold at a preferential price of 20% after the signing, it was very possible that the "strategic partner" would take the thick envelope and leave. After that, how long the "strategic partner" could keep the shares, whether they were leaked to the stock market or fell into the hands of someone else, is really difficult to control.
f. The process of organizing and implementing enterprise valuation for equitization is not reasonable.
The process of valuing enterprises for equitization is still cumbersome and complicated. The division of labor and decentralization between sectors, localities and enterprises is not clear, there is still overlap in functions and tasks, there are jobs that need to be divided into many stages, many organizations participate. Each job or each stage is undertaken by an organization, but the maximum time for completion is not determined. Therefore, almost all jobs are prolonged beyond necessary.
The professional guidance for the implementation of equitization has not been timely and thoughtful. Almost all officials at all levels are confused when implementing the work, especially in building a project to evaluate the enterprise for equitization, the charter of the joint stock company, the method of appraising the value of the enterprise, the issue of handling labor, assets and debts of the enterprise.
g. Slow to summarize and disseminate experience in enterprise valuation in the process of equitization of state-owned enterprises
Due to the characteristics of Vietnam, the work of valuing enterprises is mainly through equitization, the process of implementing equitization must deal with many specific economic, social and professional issues. We must learn while doing, and gradually supplement to gradually complete. However, the State has not regularly organized preliminary and final summaries in each industry and each locality to assess strengths, weaknesses, causes and propose solutions nationwide; at the same time, it has not helped industries, localities and enterprises learn from each other and has not disseminated information on good experiences of some countries in the world, especially countries with similar conditions to Vietnam.
2.2.3.2.5. Restrictions on regulations for valuation of intangible assets such as: brands, land use rights value, business advantages
According to the mechanism of the Ministry of Finance, valuation is focused on machinery, equipment, factories, land rental fees, with little attention paid to the brand and advantageous position of the enterprise. Deputy Minister of Finance Le Thi Bang Tam commented: Enterprise valuation in Vietnam often leans towards calculating book value; calculating potential value such as brand, future development is only estimated and added without any basis for verification . Therefore, it has led to a very large value of intangible assets but only includes a small part of the enterprise value, causing a loss of many State assets when valuing enterprises. For example, Kim Lien Hotel put its shares up for auction, investors were attracted by the value of the real estate that this enterprise is occupying. Prime location, near the park, convenient transportation, large area... while the enterprise value was determined to be only 40 billion VND. As a result, the shares of this enterprise immediately increased to nearly 20 times compared to the starting price. Thus, the real value of this enterprise is many times higher than the price decided by the Enterprise Valuation Council. Trang Tien Hotel (now Trang Tien Joint Stock Company) is a "legend" of the stock investment community. Located at 35 Trang Tien Street, in the center of the capital's centers, close to Hoan Kiem Lake, few people know that when the hotel was equitized, it was valued at only... 4 billion VND. A similar case, Phu Gia Hotel, also located in a beautiful location, with a tradition, was only valued at 3.5 billion VND while an investor had paid 5 billion to buy this hotel. Especially the valuation for the equitization of Ho Tay Shrimp Cake Company with a location close to West Lake, next to Truc Bach Lake, hundreds of square meters of land, not including houses, business reputation, if the State sold the land, it would be worth over 10 billion VND. However, this enterprise was only valued at 850 million! Or when valuing Intimex, the authorities did not include in the enterprise value the land value around Hoan Kiem Lake, but 2,800m2, including 100m2 of frontage at 26
- 28 Le Thai To, located opposite Hoan Kiem Lake. Later, the shares of this company when put up for sale
The auction was immediately sold out at 16 times the starting price.
Business valuation pays little attention to determining the brand value of the business. Typically, there are businesses that, when initially valued at CPH, are about ten billion VND, but when inviting foreign consultants to do the valuation, the true value of the business (asset value and brand value) is up to hundreds of billions of VND.
As for Saigon Tourist Corporation, according to Mr. Mai Quoc Binh, Vice Chairman of Ho Chi Minh City People's Committee, if the asset value of this corporation is only based on fixed assets as before, it will only be about 1,500 billion VND, but if the assessment is based on the asset value and brand value of the company, the amount will be 20 times larger. Obviously, based on the above assessment, in the past, although the equitization has only been piloted in small companies, it is certain that the "miscalculation" of enterprise value is inevitable. [33, p. 5]
Then, the determination of the value of the enterprise's advantage was taken into account, however, the calculation method was still limited:
+ When determining the profit rate of the 3 consecutive years before the equitization date, it is based on the current State capital. But when determining the advantage, it is based on the State capital that has been revalued. This inconsistency causes damage to the stock buyer if the State capital at the revalued price increases; it causes damage to the State if the State capital at the revalued price decreases.
+ The advantage is based on the actual business results of the enterprise, but the future of the enterprise is also affected by many other fluctuations, especially the higher the competition, the lower the super value brought by the advantage. Therefore, if 100% of the advantage is calculated into the enterprise value for sale, the buyer of shares may be at a disadvantage.
+ The business advantage of an enterprise in the electricity industry, post and telecommunications industry, oil and gas industry, etc., if equitized, the shares of this enterprise will be many times higher than the starting price because these enterprises have a monopoly business advantage. However, this issue has not been mentioned and included in the enterprise value. If the valuation is too low, a few people will occupy a large amount of state assets. Russia under Yeltsin equitized state-owned enterprises at very low prices and just over 10 years later, the assets of Russian billionaires were equal to 40% of Russia's GDP.
At the same time, the current valuation work has not added intangible values such as land use rights value and value of orchards and planted forests to the enterprise value, to carry out the sale of shares or auction of enterprises...; With the above timely findings, it is hoped that in the coming time, when conducting enterprise valuation for equitization of state-owned enterprises, there will be amendments so that the enterprise value is reflected closely to the market value of the enterprise.
2.2.3.2.6. Legal restrictions
During the equitization process of SOEs, some related legal documents supporting equitization have not been amended, thus limiting the equitization process, specifically:
- Bankruptcy law: The Enterprise Bankruptcy Law has been enacted for 10 years, in reality it is impossible to bankrupt SOEs, because the bankruptcy conditions require a petition from one of three entities: the enterprise itself, employees in the enterprise who have been owed wages for 3 consecutive months, and unsecured creditors. But in reality, all three entities do not want to file for bankruptcy in court because: The director of the SOE is not foolish enough to prove his own weakness so that the enterprise falls into bankruptcy, which would both bring bad reputation and lose personal rights, so they keep on writing off debts, keep on borrowing and accept losses, causing debt to pile up on debt. Workers in bankrupt state-owned enterprises only receive 75% of their basic salary, but they quit their jobs to work outside, waiting for retirement according to the regime, there is no reason to file for bankruptcy. If somewhere a worker intends to file for bankruptcy, the director of the enterprise can easily deal with it by paying 1 month's salary, owing 2 months so as not to owe 3 consecutive months' salary.
- On the side of the creditors of state-owned enterprises, which are state-owned banks, they are also state-owned enterprises, so they can easily sympathize with each other. They are all brothers in the same family, so they are willing to write off debts, because if the enterprise files for bankruptcy, who knows, the shortcomings in credit operations will be revealed, and people will naturally see their backs.
So without anyone filing for bankruptcy, there would be no records for the court to resolve, leading to hundreds of dead SOEs that could not be buried. These SOEs are the goods that will be “prioritized” for equitization, thus putting buyers in a situation of buying debt, buying poor quality goods.
- In specific policies, there are many overlapping and contradictory points: State-owned enterprises that are valued for equitization in which the State holds controlling shares are still State-owned enterprises; if they are members of a corporation or group, they are still members of the corporation or group. These regulations create a reverse process of nationalizing joint stock companies.
These regulations have no legal basis because a joint stock company operating under the Enterprise Law cannot be a state-owned enterprise operating under the State-owned Enterprise Law. The State appoints the director, chief accountant and other management positions in a state-owned enterprise, while the State cannot intervene administratively in the operations of a joint stock company. The appointment of management positions is under the authority of the General Meeting of Shareholders.
shareholders, Board of Directors. Even if the State holds up to 51% of shares, it is still only a shareholder. Shareholders exercise their leadership rights through voting at the general meeting of shareholders. It cannot be said that joint stock companies in which state-owned enterprises are members of corporations/groups in which the State holds controlling shares are still members of the corporations/groups; In what sense are they still members? Is it still under the current dividend-style regulatory mechanism? It can be said that those regulations lacking a legal basis have become a concern for those who want to buy shares in those enterprises.
- There are no guidelines on financial regulations, salary policies... so many equitized enterprises continue to apply the mechanisms and regulations of state-owned enterprises.
- The roles of the representative of State ownership and the person directly managing State shares at joint stock companies regarding their authority and responsibilities have not been clearly defined and properly perceived.
2.2.3.2.7. Limitations in the business environment after enterprise valuation for equitization
According to regulations, joint stock companies established by equitization of state-owned enterprises are allowed to borrow capital like state-owned enterprises, but in reality, only joint stock companies with controlling State shares are allowed to borrow capital by credit like state-owned enterprises, while other enterprises after equitization must mortgage when borrowing capital from banks. On the other hand, the consideration of capital borrowing projects of enterprises after equitization is stricter and more stringent, with many more cumbersome procedures than those of state-owned enterprises. Therefore, enterprises after equitization do not have capital to invest in expanding and developing production and business. Discriminatory policies, demonstrated by the fact that when state-owned enterprises are supported by the State, there are many lifebuoys, but private enterprises are discriminated against, creating invisible obstacles, discrimination is reflected in policies and in the attitudes of civil servants.
Previously, SOEs were allocated land by the State for production and business. Now, after equitization, enterprises must rent land. The land rental value must be calculated and the product cost. The land rental value is very large for enterprises in big cities, so it is difficult to compete with SOEs with similar conditions but allocated land by the State. The outstanding debts of SOEs in equitization have not been completely resolved, especially the bad debts that have been outstanding for many years due to the old mechanism, which are difficult to recover. This is a burden for enterprises after equitization to collect debts and pay both principal and interest on these debts.
For joint stock companies with the State holding controlling shares, the key leadership position of the enterprise such as the director of the enterprise is still maintained, and is considered the representative of the State capital. Maintaining the director of the State enterprise to continue to be the director of the joint stock company, with the old way of doing things and thinking, is not suitable for the new legal status of the enterprise and is not suitable for the market mechanism. Many directors have operated the joint stock company no differently than the director of the previous State enterprise, and the superior management agency continues to specifically intervene in the production and business activities of the joint stock company for the simple reason that the joint stock company with the State holding controlling shares is still considered a State enterprise.
2.2.3.2.8. Limitations on monitoring business valuation
In terms of direction, the slow implementation of the direction of ministries, localities and corporations in the work of enterprise valuation for equitization is due to many reasons. Typically, the State's governing bodies for SOEs, especially the sectoral agencies and specialized departments in localities.
The implementation of enterprise valuation for equitization of SOEs does not have a mechanism to monitor the preparation steps, the progress, and the quality of the enterprise valuation. This is the reason why the valuation work is of poor quality, slow progress, and does not meet the plan set by the Government. In some places, after the valuation, the State initially holds a controlling proportion with the condition of helping to stabilize the enterprise, but some localities continue to hold controlling shares to maintain the SOEs as before, which is a formal equitization, a coping equitization.
To see more clearly the comments and assessments of the above advantages and disadvantages, the thesis continues to conduct a survey of the actual work of enterprise valuation in the current process of reforming state-owned enterprises in Vietnam.
2.2.4. Survey on the current status of enterprise valuation in the process of equitization of state-owned enterprises in Vietnam
This is an important content to evaluate the current status of enterprise valuation in the process of equitization of state-owned enterprises in Vietnam in order to best verify the assessments, analyses, and comments presented in the above section on the advantages and limitations of current enterprise valuation in Vietnam. The selection of enterprises for the thesis to conduct a survey is random, they represent the common status of enterprise valuation in the process of equitization of state-owned enterprises applied