Venture Global IPO Debuts with Mixed Results
Arlington, Virginia - Venture Global Inc. (VG) made its public market debut on Friday, but shares fell 4% below the initial offering price of $25 each. The closing price of $24 resulted in a market capitalization of $58.1 billion, significantly lower than the $110 billion valuation sought before Wednesday's downsizing of the offering. Including employee stock options, the diluted valuation stands at over $64 billion.
VG raised $1.75 billion by selling 70 million shares at $25 apiece, within the revised price range. Despite this, the offering marked the largest first-time share sale in the US energy sector since 2021, ending a drought that saw only six energy IPOs raising a combined $667 million last year. It also sets the stage for a potentially strong year for IPOs, driven by expectations of deregulation and tax cuts under the Trump administration.
However, the significant price reduction, exceeding 40% and the largest on record for a major IPO since 2014, has raised concerns among private companies considering listings. The initial range adjustment reportedly stemmed from demands from prospective investors. Even with the revised target, VG's market value remains 10% above Cheniere Energy's.
Despite its strong position to benefit from President Trump's focus on expanding liquefied natural gas (LNG) exports, industry experts have highlighted challenges such as securing long-term contracts in Europe. Richard Pratt, an independent consultant, expressed skepticism about VG's earlier price expectations, citing uncertainties in demand growth projections.
Global LNG Market Dynamics
Global demand for LNG has been rising as countries transition to cleaner fuels. The United States has emerged as the leading exporter, leveraging its abundant gas supply and advanced liquefaction terminals. President Trump has been a vocal advocate for increasing US oil and gas exports, threatening tariffs on EU member states that fail to increase purchases.
Venture Global CEO, Mike Sabel, has welcomed the support of the new administration for domestic LNG growth, along with allies. However, he acknowledges the company's strong growth under previous administrations. Trump's executive order lifting the LNG export moratorium, originally imposed by Joe Biden, has paved the way for Venture Global's proposed CP2 facility, estimated to cost between $27 billion and $28 billion.
Analysts at BloombergNEF have expressed caution regarding Venture Global's growth prospects, citing potential LNG oversupply in the coming years. Despite the expected increase in global LNG supplies, Sabel remains optimistic about the market, emphasizing the undersupply in Europe and Asia, as well as growing demand from data centers and new power plants.
Company Background and Challenges
Founded in 2013, Venture Global initially faced skepticism within the Houston energy industry. However, the company secured long-term agreements with major energy players, such as Shell and BP, to purchase LNG from its terminals.
The first LNG export terminal, Calcasieu Pass, began operations in 2022. However, instead of fulfilling contracts, Venture Global sold all its cargoes on the spot market, where prices were higher. The company justified this as part of the plant's commissioning phase.
This has drawn legal challenges from customers, including Shell, BP, and others, who have filed arbitration cases to enforce their contracts. Venture Global maintains that these claims lack contractual basis.
IPO Details
The IPO was led by Goldman Sachs Group Inc., JPMorgan Chase & Co., and Bank of America Corp., with support from 17 other banks. Shares are trading on the New York Stock Exchange under the symbol "VG."
For the nine months ended September 30, 2024, Venture Global reported net income of $756 million on revenue of $3.4 billion, compared to $3.6 billion net income on revenue of $6.3 billion in the corresponding period of 2023.