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Venture Global scales back IPO target by 41% amid investor hesitation

LNG producer Venture Global has scaled back the valuation it is seeking in its initial public offering (IPO) by about 41% after investors were hesitant in response to the company’s previous plans for the listing.
Venture Global had initially been seeking a valuation of up to $110bn under a plan to issue 50mn shares for $40-46 per share. However, in a January 22 filing with the US Securities and Exchange Commission (SEC), this was revised to 70mn shares, priced at $23-27 per share, for a valuation of up to $65bn.
The revision came after investors were reported to have expressed scepticism over Venture Global’s estimated long-term profits. Several investor sources invited to buy shares in the proposed New York Stock Exchange (NYSE) flotation told Reuters that investors had questioned whether Venture Global makes enough money to justify the initial IPO price.
“We are having a hard time getting to the market cap, and I know a few other dedicated funds we've spoken to are not remotely close either," said one investor, who spoke to Reuters on condition of anonymity prior to the revision.
Separately, the Financial Times cited a hedge fund investor who specialises in the energy sector as saying that investors had also taken issue with the relatively small amount of equity initially offered for sale by the company.
“While the growth story for Venture Global is compelling and differentiated, investors pushed back on the near 20 times enterprise value to earnings multiple while its lower growth peer Cheniere trades at 12 times,” hedge fund Gallo Partners’ chief investment officer, Michael Alfaro, was quoted by the Financial Times as saying. “The revised range substantially closes that gap putting Venture Global closer to 13 times, while still maintaining robust multiyear growth,” he added.
Cheniere Energy is the largest US LNG exporter and the best comparison for Venture Global, according to Reuters’ sources. It has a market value of around $56bn.
"I would feel better if the valuation were closer to Cheniere," one of Reuters’ sources was quoted as saying.
At the high end of its new targeted share price range, Venture Global would raise almost $1.9bn, down from its previous goal of $2.3bn, which would have been one of the largest energy sector listings in more than 10 years. However, an IPO is never guaranteed to price within the initial range targeted at the start of the marketing process. The final price will depend on discussions between the company and potential investors, as well as advisers. And indeed, Venture Global could cancel the IPO if investors push for a valuation that it considers too low.