In financial markets, the border between ambition and delusion is often dangerous, like life. The recent Liquid Natural Gas Exporter Venture Global IPO is an example of a textbook that can even elucidate even the most promising prospects when investors’ skepticism collides with the ambitions of Sky High. Those who began as a confident march supported by the appeal of the energy of the Trump era and the lively LNG export market, have quickly turned into a warning story due to the favor of the capital market.
The stars seemed to be available. The US stock market is shedding tears. The next administration has promoted natural gas violently and withdraws the pause of the Ministry of Energy on LNG exports. In response to this positive background, the venture global has set a $ 2.3 billion evaluation range for $ 40-46 IPOs per share, aiming for a stratile zone.
However, even in this struggle, the market does not run with pixie dust alone. Investors began with future cash flow ratings from five LNG terminals, and BALK’s assumptions. The fund manager is also paying back the assumptions of $ 6 per million in the UK heat unit, which is spreading to LNG sales, and has not yet signed a contract. Only 1.9 % of the free float left many potential buyers. And there was a legal muddy swamp: billions of dollar arbitration from BP and shells argued that venture global sales have abolished contract obligations by selling LNG in the spot market.
Investors are well retained despite the pressure from the underwriting company. In their view, venture global could not justify 30 % or more premiums on the EV/EBITDA -based EV/EBITDA -based premium compared to the more established peer, Cheniere Energy. Well, I already own it. Even hot markets are expecting an IPO discount.
Faced by the concerns of the mount, the IPO was dramatically re -processed, and its evaluation was reduced by dropping 42 % jaw. The stock price was $ 2555 million at a price of $ 25 and the middle point of the modified $ 23 to 27. This is equivalent to a humble mountain climbing, revealing the cracks between the bravery of the officer and the judgment of the merciless market.
How was the bank and the management so wrong? In fact, these kinds of misunderstandings are not so unusual.
One of the possible culprit is the Eco System of the Investment Bank. Banks are operated in a world, which is measured by the obligations of success and commissions. Gaining the IPO pitch is often the most persuasive (read: optimistic) evaluation. In the world of the equity capital market, the mantra also “runs on poetry pitch and prose.” Banks are punchy enough to maintain reliability.
The lower evaluation may be more realistic, but it will not win the delegation. All Equity Capital Market Bank House -I mean, I mean, the discussion of the presentation deck has a rating of the discussions of other banks, so I will tell you that you lose a large IPO pitch You can. Of course, no client tells banks that are spurred if their number is too conservative. UP song expression is that you can’t always know the “misunderstanding of the story” or “the possibility of growth”. But you get points.
The venture global leadership may have played that role. In my experience, the founders and executives of such companies are often charismatic and foresight. Their confidence is very quality that promotes their success, and can also resist the advice that feels like braking. Tell the surprisingly successful entrepreneur that they are less valuable than they think they are not for faint people. It is also possible that the bank did not fully push the expectations of the company’s evaluation with the pressure to keep the client happy. I’ve seen this happens many times.
That said, there is no general reason for IPO resigned or withdrawal. Occasionally, the stock market will decrease during the marketing process, so that something that seems to be a reasonable price range will not be accepted suddenly. But that was not the case here. If anything, the enthusiasm of the Trump era created a foaming environment. However, investors are still limited. Venture Global has discovered that no matter how lined up with the historian, it does not command premium prices.
So what is the big deal about re -rick the IPO? After all, isn’t the price discovery part of the process? Technically, yes. But cost is still important. The downward re -rick is not just a financial adjustment. It is a psychological blow. The momentum changes. The story evolves from “hot tickets” to “Let’s wait”. The company loses price leverage, and investors are dominant. In fact, two large -scale fund managers said that they participated in Friday for $ 27-30 per share, whereas offering was priced at $ 25.
Therefore, for the venture global, radioactive drops exceed the injured pride and temporary embarrassment. Procurement of capital under conditions that are not very advantageous is a concrete recession.
The shares have stumbled from the gate and closed 4 % on Friday for $ 24. No one can say it, but it’s worth asking if the initial price range is low, you may have avoided a rock -filled start. The re -remittance has a shadow on the dynamics of transactions and the extremely unrealistic nature of the first price range. Otherwise, it would have been acceptable to the investor (I told Mainft to Mainft, “Gaslight in the best state”) to convince other fund managers to support it. We are sown about other management claims. This product could be a huge hit with a powerful market tailwind. Instead, the market debut of the venture global landed with the blessings and buoyancy of the contracted balloon.
However, not everything is lost. Reducing the price range of IPO can only be hiccuped. Some companies have overcome this experience and prosper. Google set the price of IPO in 2004 from the $ 108 to 135, then set a price of $ 85, and the rest is a history.
More generally, the market has a re -adjustment method, and Venture Global’s IPO offers subtle lessons. The evaluation reminds me that it was not fixed by management and bankers, but was attacked by investors.
The important points from the market debut of the venture and lobal are obvious. Investors are willing to pay for premium evaluation, but only when finance justifies it today. line.
Even in these optimistic markets, there is a boundary between the foresight and the reliability of the evaluation. Venture Global’s miniaturized product is not a negative sign for the IPO market, but a real check at an excessive market in the market.
