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Investors to be selective as IPO market attempts comeback

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Venture Global's valuation cut seen as a unique case

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2025 IPO market rebound on track, industry experts say

By Niket Nishant and Manya Saini

Jan 24 (Reuters) - The tepid reception to Venture

Global's ambitious valuation target shows companies need to set

realistic expectations when going public, Wall Street analysts

said, and could be a signal that the recovery in new offerings

may be a cautious one.

Touted as the first blockbuster listing of 2025, the LNG

exporter was initially aiming for a price tag as high as $110

billion, only to settle for 45% lower when it eventually sold

shares in the IPO on Thursday.

"Even with the improved market sentiment we've seen,

investors are going to continue scrutinizing deals carefully,"

said IPOX CEO Josef Schuster.

"They aren't broadly willing to pay over-valued companies

when there are readily available market comparisons."

Venture Global's IPO price of $25, the mid-point of the $23

to $27 range, was 7.67 times its adjusted tangible book value,

according to a Reuters calculation.

Rival Cheniere trades at 10.55 times its book value

in 2024, according to LSEG data, and has a market value of $52.6

billion.

The pushback against Venture Global's initial target came as

sort of surprise, as it seemed to have a few factors going for

it: demand for natural gas worldwide and a desire for more

fossil-fuel production from new U.S. President Donald Trump.

The LNG firm's contract dispute with some of its customers

may also have prompted it to temper expectations after meeting

resistance from investors.

"Venture Global was proposing a high absolute market cap

than the closest peer. It's also possible that the legal issues

turned off some investors or made them comfortable pushing back

on valuation," said Nicholas Einhorn, vice president of research

at Renaissance Capital.

The investor skepticism also points to the challenges of

pushing for maximal valuations when the markets are already

staring at several risks, such as fewer interest-rate cuts than

expected and the potential fallout of tariffs proposed by

President Trump.

"There are layers and layers of uncertainty," said Michael

Bayer, CFO at Wasabi Technologies and adjunct lecturer at Babson

College.

While an underwhelming performance from Venture Global could

be a hiccup, it is unlikely to halt the IPO plans of major

technology companies lining up to go public, such as Swedish

payments firm Klarna and fintech giant Chime.

"I expect Venture Global's IPO to have little bearing on

the prospects for this year's robust pipeline of tech and

venture capital IPOs," said Michael Ashley Schulman, partner and

CIO at Running Point Capital Advisors.

A renewed risk-on sentiment and progress in bringing

inflation down to the Federal Reserve's 2% target may also be

tailwinds.

"Companies with strong fundamentals, a compelling growth

narrative and transparency in their financial and operational

performance can still find success in the public markets," said

Mike Bellin, IPO services leader at PwC U.S.

(Reporting by Niket Nishant and Manya Saini in Bengaluru;

Editing by Arun Koyyur)