Venture Global Shares Sink 4% in Debut After Scaled Back IPO
Venture Global Shares Sink 4% in Debut After Scaled Back IPO ·Bloomberg
Ruth Liao, Geoffrey Morgan and Bailey Lipschultz
6 min read
(Bloomberg) -- Venture Global Inc. shares slipped 4% in the natural gas exporter’s debut as a public company, after slashing its price target ahead of its IPO.
Shares of Venture Global closed at $24 each on Friday, below the initial public offering price of $25 apiece. The trading gives the Arlington, Virginia-based company a market value of $58.1 billion, based on the outstanding shares, well below the $110 billion figure it had sought before it scaled back the offering on Wednesday.
Including employee stock options, the company’s diluted valuation would be more than $64 billion.
Venture Global sold 70 million shares on Thursday for $25 each, in the middle of a reduced range, to raise $1.75 billion. The US’s biggest energy-sector first-time share sale since 2021 has reversed a drought that saw just six energy IPOs in the US raising $667 million last year — the lowest volume in more than two decades, data compiled by Bloomberg show.
It’s also kicked off what’s expected to be a banner year for IPOs, as markets position themselves for a wave of deregulation and tax cuts from President Donald Trump’s administration — and vaulted founders Mike Sabel, 57, and Bob Pender, 71, into the upper ranks of the billionaire set.
Still, the lowering of the price range by more than 40% — the largest drop on record for a sizable IPO since 2014, equating to a roughly $45 billion cut in the maximum market value — likely sent a chill up the spines of private companies considering listings this year.
The calls for a lower range came from prospective investors, Bloomberg News has reported. Even after reducing the target, the listing gives Venture Global an undiluted market value that’s more than 10% above Cheniere’s. The company also faces pending arbitration claims from several of its customers that had grown to nearly $6 billion as of late last year.
Though Venture Global is positioned to benefit from Trump’s plan to sell more liquefied natural gas to the world, some in the industry have cited difficulties such as securing long-term contracts with Europe.
“Venture Global look to have based their price on an expectation of unbridled demand growth to match the US’s upstream ability to bring forward massive volumes of gas for liquefaction,” said Richard Pratt, an independent consultant with Precision LNG, referring to Venture Global’s earlier price range.
“There are so many uncertainties involved in those expectations but the price has totally discounted these,” Pratt said.
LNG Demand
Demand around the world is surging for LNG, with many nations seeking a cleaner-burning alternative to oil and coal as they shift toward renewable energy. The US has emerged as the world’s largest exporter thanks to an abundant supply of gas and the development of huge terminals to liquefy and ship the fuel.
Trump is a vocal backer of increasing the US’s oil and gas exports, and has even threatened the European Union that it could face tariffs if member states don’t buy more. The President wasted no time after being inaugurated, issuing an executive order directing his Energy Department to resume reviewing applications to export LNG to countries in Asia and elsewhere.
Venture Global’s Sabel has seen encouragement for supporting US LNG growth from the new Trump administration and Congress, as well from allies.
“We’re happy with the support from this administration but we grew our business very fast with the Obama administration and then the Biden administration as well,” he said in an interview with Bloomberg News.
Trump’s move reversed a moratorium Joe Biden ordered a year ago, disrupting plans for export projects including Venture Global’s proposed facility known as CP2. The project is expected to cost between $27 billion and $28 billion, and the company is working to sell additional LNG from the project to oil majors, utilities and trading houses, the filing shows.
“The company’s reduced valuation target may reflect investor caution over its growth prospects amid potential LNG oversupply in the coming years,” according to a report Thursday from BloombergNEF analysts Han Wei and Abhishek Rohatgi. BloombergNEF expects global LNG markets to face oversupply after 2027, and marketing their proposed projects will be challenging, the analysts wrote.
Despite the growth of new LNG supplies coming online in the next decade from the US and Qatar, Sabel sees the LNG market as “very undersupplied” for the fuel, especially in Europe and Asia and sees the excess capacity of energy markets running on coal-fired generation, as well as new demand for data centers and new power demand as market drivers, bucking the trend from analysts predicting a supply overhang.
Outsiders to Energy
When Sabel and Pender launched Venture Global in 2013, they were initially viewed as outsiders to the Houston energy industry and a longshot bet to the growing ranks of US LNG project developers.
Yet the pair managed to convince some of the world’s biggest energy companies including Shell Plc and BP Plc to sign long-term agreements to buy LNG from the terminal they planned to build.
“We’ve grown our business when it was just the two of us at the very beginning,” Sabel said, adding that it now has 1,500 direct employees.
Venture Global’s first LNG export terminal, named Calcasieu Pass, began shipping fuel in 2022. But instead of supplying its long-term customers, the company sold all its cargoes into the spot market, where prices are significantly higher. The company has justified the move saying the plant remains in its “commissioning phase” as it works out kinks, which it contends absolves it from fulfilling contracts yet.
That’s sparked opposition from Venture Global’s customers. Shell, BP, Repsol SA, Galp Energia SGPS SA, Orlen SA, China’s Sinopec and others have filed arbitration cases against the company, trying to force it to honor its contracts.
The claims allege the company hasn’t delivered gas to customers at Calcasieu Pass that signed up for long-term contracts. A Venture Global spokesperson said the cases have no contractual or other basis.
The pending arbitration had not been material to the discussions with investors, Sabel said. The IPO tapped into a broad range of investors, including ones that invest in growth and are attracted to energy, infrastructure and AI, as demand for power will be needed, he said.
Venture Global plans to start fulfilling contracts for its Calcasieu Pass customers in March 2025, according to the filings. It sent its first shipment from its Plaquemines LNG facility outside New Orleans in December.
The company had net income of $756 million in the nine months ended Sept. 30 on revenue of $3.4 billion, versus net income of $3.6 billion on revenue of $6.3 billion in the same period in 2023, the filing shows.
The offering was led by Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp., with 17 other banks working on the deal. The company’s shares are trading on the New York Stock Exchange under the symbol VG.
(Updates with closing price, valuation in first three paragraphs.)
