Analysis: Investors looked at Venture Global’s earnings outlook before the IPO price cut.
By Echo Wang, Curtis Williams and David French
(Reuters) – Venture Global LNG has been forced to halve its asking price in its U.S. initial public offering (IPO) as investors say the company has long-term profits to release gas to export markets, investors told Reuters.
The company is the second-largest exporter of liquefied natural gas in the United States, which is itself the world’s largest exporter of the super-refrigerating fuel.
The listing is a rare opportunity for investors to gain equity-market exposure to US LNG, reflecting both the company’s potential in the energy export business and confidence in the oil and gas policies expected from President Donald Trump’s administration.
The Arlington, Virginia-based company cut its estimate on Wednesday by more than 40% to its highest guidance of $65 billion, down from $110 billion. The revised IPO plan, first reported by Reuters on Tuesday, will issue more shares to make up for some of the gaps in fundraising from a lower estimate.
Investors have questioned whether Venture Global will raise enough cash to justify its initial IPO price, several investor sources told Reuters who were invited to buy shares in the planned New York flotation.
“We’re having a hard time getting to the top of the market, and I know a few other funds that we’ve talked to aren’t even close,” one investor said before the review, all sources told Reuters. He requested anonymity to discuss confidential information.
Venture Global did not respond to a request for comment.
The initial asking price exceeded that of Cheniere Energy by multiple earnings, the sources said. Cheniere is the largest US LNG exporter and the best comparator for Venture Global, the sources said.
“I would have felt better if the valuation had been closer to Chenier,” said a second investor.
Future earnings projections require market and pricing conditions to allow Venture Global to hit all of its growth targets and stay on track, investor sources said.
For example, Venture Global said in its IPO filing that it expects to earn about $4.52 per million dollars “over time” when it charges its customers for the service.
Although liquidation fees typically range from $2 to $3 per MMBtu in the United States, according to the filing.
After revising the price guidance and the number of shares offered, the upper end of the proposed $23-$27 per share price range would still value Venture Global at up to $1.9 billion and $65.3 billion, according to Reuters calculations. This makes it one of the ten largest US energy companies by market capitalization.