On January 24, Wall Street analysts stated that Venture Global's ambitious valuation target received a lukewarm response, emphasizing the need for companies to have realistic expectations before going public. This reception could signal a cautious trend in new offerings.
Marketed as the first notable listing of 2025, the LNG exporter aimed for a higher valuation but eventually settled for a 45% reduction during its IPO on Thursday.
Josef Schuster, CEO of IPOX, highlighted, "Even with the improved market sentiment, investors will scrutinize deals carefully and are unwilling to pay excessive prices for over-valued companies when comparable market options exist."
Venture Global's IPO price of $25 was 7.67 times its adjusted tangible book value, as per a Reuters calculation, while Cheniere, its competitor, traded at 10.55 times its book value in 2024, with a market value of $52.6 billion according to LSEG data.
The diminished initial offering of Venture Global surprised some, given the global demand for natural gas and the support for increased fossil fuel production under President Donald Trump. Legal issues with customers likely contributed to tempering investors' expectations.
Nicholas Einhorn, Renaissance Capital's VP of research, noted, "Venture Global aimed for a higher market cap than its closest competitor, possibly deterring some investors and leading to valuation pushback."
Furthermore, challenges persist in maximizing valuations amidst market risks like uncertainty around interest rate cuts and potential repercussions of President Trump's proposed tariffs, according to Wasabi Technologies' CFO Michael Bayer and Babson College's adjunct lecturer.
Despite the setback with Venture Global, technology giants like Klarna and Chime are anticipated to progress with their IPO plans. Michael Ashley Schulman from Running Point Capital Advisors believes Venture Global's IPO outcome will not affect the robust pipeline of tech and venture capital IPOs for this year.
Mike Bellin, IPO services leader at PwC U.S., indicated, "Companies demonstrating strong fundamentals, a compelling growth story, and financial transparency can still succeed in public markets, especially with renewed risk appetite and progress toward the Federal Reserve's inflation target."