(Oil Price) – LNG producer and exporter Venture Global went public this week, raising $1.75 billion for a total valuation of $60 billion.
The company priced its share offering at $25 apiece, it said in a statement, which added the offering period will end on January 27.
The price of the placement is a lot lower than Venture Global initially planned. The revision came as a result of a negative reaction from potential investors, according to media reports. Initially, the company eyed a market cap of $110 billion, prompting doubts among investors about how realistic its expectations for profits are. A market cap of $110 billion would be bigger than that of BP.
“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,” one investor told Reuters.
Following this reaction, Venture Global slashed its valuation estimates by lowering its IPO price range by 40%, for a maximum market cap projection of $65 billion. It seems that some investors remain wary of the LNG exporter.
“I pushed back on them initially and then they [Venture Global’s bankers] tried to insist that I was the odd one out and that all other investors were OK with the much higher multiple. Gaslighting at its best,” one unnamed investor told the Financial Times.
Another investor, Cole Smead of Smead Capital Management, said he had not invested in Venture Global even though the fund specializes in energy investments. Smead noted that capital markets were tough for energy companies at the moment.
Venture Global is a relative newcomer on the LNG stage but it has already earned a controversial reputation for not keeping its long-term contracts and instead selling all its LNG on the spot market to make more money.
The company’s defense has been that its first LNG plant, Calcasieu Pass, was not really completed, which left it with a loophole to sell on the spot market but not make deliveries under long-term contracts. The company has also tried to further postpone the official commercial operation date for Calcasieu Pass so it can continue diverting volumes from long-term contracts to the spot market.
By Irina Slav for Oilprice.com
