Venture Global LNG IPO Faces Reality Check
A Rare Opportunity in the Energy Export Business
Venture Global LNG, the second-largest exporter of liquefied natural gas in the United States, has been forced to reassess its valuation in its upcoming initial public offering (IPO). The company, which is seeking to raise funds to expand its operations, initially sought a valuation of $110 billion. However, investors have pushed back, citing concerns over the company’s long-term profit projections for liquefying gas for export.
A Test of Market Faith in Pro-Oil and Gas Policies
The IPO is seen as a rare opportunity for investors to gain exposure to the U.S. LNG market, which is expected to benefit from President Donald Trump’s pro-oil and gas policies. The listing is also a test of market faith in the administration’s ability to boost the energy export business.
Revised IPO Plan
In response to investor concerns, Venture Global has slashed its price range by over 40% to an upper guidance of $65 billion. The revised IPO plan also offers additional shares to bridge the gap in fundraising from the lower valuation. Despite the revision, the top end of the proposed $23-$27 per share price range would still raise as much as $1.9 billion and value Venture Global at up to $65.3 billion.
Cheniere Energy: A Key Comparison
Investors have questioned whether Venture Global’s valuation is justified, citing Cheniere Energy, the largest U.S. LNG exporter, as a more realistic comparison. Cheniere’s earnings multiple basis is seen as a more suitable benchmark for Venture Global’s valuation.
Future Earnings Forecasts Under Scrutiny
Venture Global’s future earnings forecasts have also come under scrutiny, with investors expressing concerns over the company’s ability to hit its growth targets and navigate market and pricing dynamics. The company’s IPO filing suggests it expects to earn around $4.52 per million British thermal unit “over time,” which is higher than the traditional liquefaction fees of $2-$3 per MMBtu in the United States.
Litigation Looms
Hanging over the prospects for Venture Global’s IPO is ongoing litigation involving some of the world’s largest energy companies. The dispute centers on cargoes exported from Venture’s first project, the Calcasieu Pass plant, and could cost the company billions if lost.
Will the IPO Happen?
While an IPO is never guaranteed to price within the initial range, changes are common. Venture Global could cancel the flotation and remain private if it feels investors want a valuation it considers too cheap. A delay could be favorable, allowing the company to settle litigation and make progress on its expansion, as well as for the market to absorb the impact of Trump’s energy policies.
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