Niket Nishant and Manya Saini from Reuters bring us insights into the current IPO landscape, particularly focusing on Venture Global’s recent market moves. Analysts from Wall Street are emphasizing the importance of realistic valuation targets for companies considering going public, a sentiment accentuated by the lukewarm response towards Venture Global’s ambitious valuation. This suggests that while there is a recovery in new offerings, it is expected to be tentative.
Widely anticipated as the standout IPO of 2025, the LNG exporter initially set its sights on a valuation as high as $110 billion. However, the reality was starkly different as they settled for a value nearly 45% lower during their share sale on Thursday.
Josef Schuster, CEO of IPOX, noted, “Even with market sentiments improving, investors will continue to scrutinize deals closely. They’re unlikely to pay a premium for overvalued companies, especially when there are comparable options available in the market.”
The IPO saw Venture Global setting its stock price at $25, sitting comfortably in the middle of the expected $23 to $27 range. This was calculated by Reuters to be 7.67 times its adjusted tangible book value. In comparison, Cheniere, a rival in the industry, is trading at 10.55 times its book value and boasts a market value of $52.6 billion according to LSEG data.
Despite some favorable conditions such as high global demand for natural gas and a push for increased fossil fuel production under President Donald Trump, investors pushed back against Venture Global’s initial valuation. There were rising concerns, especially as the company was embroiled in a contract dispute with some customers, forcing a reassessment of expectations.
Nicholas Einhorn from Renaissance Capital pointed out the firm’s ambitions to set a higher market cap compared to its closest peers, and suggested that the legal entanglements might have deterred some investors or emboldened them to challenge the proposed valuation.
The investor caution highlights an overarching challenge: attempting to maximize valuations in a market already facing several uncertainties. These include fewer anticipated interest rate cuts and the potential impact of proposed tariffs by President Trump.
“There are multiple layers of uncertainty,” explained Michael Bayer, CFO at Wasabi Technologies and adjunct lecturer at Babson College.
While Venture Global’s subdued market debut represents a stumble, it’s unlikely to derail IPO ambitions for major technology firms like Klarna and Chime, which are preparing to go public.
Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors, remarked, “I anticipate that Venture Global’s IPO will have minimal impact on this year’s robust lineup of tech and venture capital IPOs.”
Additionally, positive shifts like an improved risk-on sentiment and progress toward the Federal Reserve’s 2% inflation target could provide beneficial conditions for public offerings.
Mike Bellin, IPO services leader at PwC U.S., concluded by saying, “Companies that demonstrate strong fundamentals, compelling growth stories, and clarity in their financial and operational reports can still thrive in the public markets.”
(Adapted by Niket Nishant and Manya Saini in Bengaluru; Edited by Arun Koyyur)
