Analysts Urge Caution With IPO Investors ‘Scrutinizing Deals Carefully’

The past few weeks have seen hopeful reports about an IPO resurgence.

But as Reuters reported Friday (Jan. 24), some Wall Street analysts are urging caution following a lukewarm reaction to Venture Global’s valuation target for its initial public offering (IPO).

That company had hoped for a $110 billion price tag but settled for a 45% downgrade when it finally sold shares last week.

“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 overvalued companies when there are readily available market comparisons.”

The Reuters report noted that the pushback against Venture Global’s initial target was something of a surprise, considering a rising demand for its product — natural gas — and a new presidential administration that wants to see an increase in fossil fuel production. The report added that a contract dispute with some of Venture Global’s customers may also have wind back expectations after seeing 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.

As PYMNTS has reported, this year could see a number of high profile IPOs from companies including  payments/buy now, pay later (BNPL) firm Klarna, artificial intelligence (AI) cloud company CoreWeave, and FinTech Chime.

“Momentum may be on the side of FinTechs in the current year,” PYMNTS wrote last month. “First there’s the momentum of the overall markets, which may be readying for the incoming presidential administration, which some investors and executives expect to be arguably ‘business friendly’ in terms of regulations, crypto and taxes.”

This month also brought a report from the Financial Times (FT) that retail trading platform eToro was preparing to go public in the U.S., with sources saying a listing could come as soon as the second quarter of the year. A company spokesperson told PYMNTS eToro would not comment on “IPO rumors.”

The FT report noted that eToro — whose biggest market is in Great Britain — has become the latest startup to apparently avoid going public in London. That city’s stock exchange has struggled in recent years to draw high-profile listings.