Venture Global's record price cut
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Venture Global, the second largest liquified gas exporter in the U.S., raised about $1.8 billion in an IPO valuing it at $67.4 billion — some 45% below its expected valuation.
Why it matters: The company and bankers dramatically miscalculated the market, overestimating the natural gas Trump bump.
Driving the news: "Venture Global had the biggest IPO price cut for a billion-dollar IPO in our firm's 30+ year history," Rennaisance Capital's Matthew Kennedy wrote in an email. "The closest is Google in 2004, which priced 30% below the midpoint as a result of its unusual Dutch auction IPO."
Zoom in: And that's true even among IPOs raising over $500 million.
Context: President Donald Trump declared an "energy emergency" this week that is expected to benefit traditional companies in the space.
Yes, but: Potential investors weren't buying it.
- Cheniere Energy, the largest liquified natural gas producer in the country, is trading at a $52.6 billion valuation on the NYSE compared to the over $100 billion valuation Venture Global was originally seeking.
- Venture Global emphasized its plans to build out their production capacity, some of which are not expected to be commercially operational until 2034.
- "Management was expecting credit for some of their longer term projects into the next decade," says Enverus Managing Director Andrew Gillick. "Investors were a little more cautious."
Investors are giving it a higher valuation compared to Cheniere, which may due to Venture Global's ability to participate in the upside of the spot market — rather than tying all of its supply up in existing contracts and terms.
- Trump lifting the freeze on LNG export permit applications was undoubtedly a positive sign for Venture Global and its ilk, but that's no promise of performance.
- Meanwhile, parts of the energy sector are getting an AI boost, but Venture Global isn't really viewed as an AI play.
The bottom line: Venture Global was pitching itself with tech industry-like optimism to an investor base known for betting on the fundamentals.
