Venture Global's Big IPO Flop Intact Even After Revenue Beat
Shares climbed around 2.6% on Tuesday after the company beat on revenue and said one of a set of arbitration cases would be decided 'imminently.' The gain barely offset the stock's recent losses, Venture Global still trades at about half of its January initial public offering price of $25 a share.
'We saw the IPO price as priced for perfection in execution,' said Adam Baker, a Morningstar Investment Service analyst who rates the stock a hold. 'They have grand visions and some of those visions won't be realized into the 2030s.'
For now the Arlington, Virginia-based company is being hit by a triple whammy of volatile LNG pricing, ongoing arbitration, and an enormous debt pile which has helped cement its place as this year's worst-performing US IPO raising over $50 million, according to data compiled by Bloomberg.
Venture Global reported $3.1 billion in revenue for the quarter, beating the average analyst estimate of $2.9 billion while net income of $368 million missed by 39%. Lower liquefied natural gas prices at the Louisiana Calcasieu Project offset higher sales volumes at other projects.
'They're a company in heavy growth mode and they're building very expensive facilities and they're pursuing a minimum amount of those volumes being contracted,' Baker said. 'So their stock share price is going to be volatile and track movements in Dutch LNG indexes.'
This marked the firm's second earnings print since it went public, in a $1.75 billion IPO that remains the biggest in the US this year. Venture Global shares fell 4% in its first day, even after the company had already scaled back its price range by more than 40%, having sought as much as $46 a share.
Even expedited project approvals under the Trump administration have failed to reignite shares and the biggest bulls have price targets below the IPO price.
Hedgeye Risk Management analyst Fernando Valle rates the stock a buy and sees $18 to $20 as a fair price for the shares. He expects the company to benefit over the next five to 15 years from the US cost advantage in natural gas.
Meanwhile, Dutch TTF Natural Gas Futures are down over 30% this year as higher inventories in Europe and the US weigh on prices and the stock.
Another focus for investors has been the company's arbitration. Venture Global faces nearly $6 billion in pending arbitration claims stemming from its Calcasieu LNG plant which began producing in 2022, but didn't deliver gas to its customers until 2025.
Hedgeye's Valle says a negative impact from arbitration has already been priced in, but a positive result from the first decision could set the tone for future cases and change the outlook.
Valle says investors are split on Venture Global, with some concerned about a lack of clarity around pricing structures. Wall Street is also split on the company; among the 16 tracked by Bloomberg, one half gives it a buy-equivalent rating and the rest assigns it a hold-equivalent grade.
'There are people who love it and people who certainly don't,' Valle said in an interview. 'The don'ts are really more concerned about management and the communication, and the ones that love it just see the value of the assets and the long-term contract and also the speed of execution.'
--With assistance from Jaren Kerr.
More stories like this are available on bloomberg.com
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