Appetite for IPOs is strong, but watch those valuations, analysts say
By Niket Nishant and Manya Sanini
(Reuters) – The rapid reception to Venture Global’s large valuation target has prompted Wall Street analysts to say that companies need to set realistic expectations when going public, and a rebound in new offerings could be a cautious sign.
In the year Touted as the first blockbuster listing of 2025, the LNG exporter had initially planned for a valuation of as much as $110 billion, but was ultimately slashed by 45% when it finally sold shares in an IPO on Thursday.
“Even with the improved market sentiment we’ve seen, investors will continue to scrutinize deals,” said IPOX CEO Joseph Schuster.
They are unwilling to pay overpriced companies when there are market comparisons readily available.
Venture Global’s IPO price of $25, the midpoint of a range of $23 to $27, was 7.67 times its adjusted book value, according to Reuters calculations.
Rival Cheniere trades at 10.55 times book value in 2024 and has a market cap of $52.6 billion, according to LSEG data.
The push against Venture Global’s initial target came as a surprise, as it appears to have a few factors: global demand for natural gas and demand for more fossil fuel production from new U.S. President Donald Trump.
The LNG company’s contract disputes with some of its customers may have upset expectations after it drew opposition from investors.
“Venture Global offers a better absolute market value than its closest peers,” said Nicholas Einhorn, vice president of research at Renaissance Capital.
Investor skepticism also points to challenges in exerting significant valuation pressure at a time when markets are facing a number of risks, such as lower-than-expected interest rate cuts and tariffs proposed by President Trump.
“There are levels and levels of uncertainty,” said Michael Baier, CFO at Wasabi Technologies and adjunct professor at Babson College.
While the lackluster performance from Venture Global may be a hindrance, it cannot stop the IPO plans of major tech companies such as Swedish payments firm Klarna and fintech giant Chime to go public.
“I expect the Venture Global IPO to have no impact on the prospects for strong technology and venture capital IPOs this year,” said Michael Ashley Shulman, partner and CIO of Running Point Capital Advisors.