Is Excelerate Energy Inc. a Good Buy?

In Summary:

• Because of the crisis in Ukraine, the market for new listings has softened dramatically this year.
• Nevertheless, companies tied to critical sectors like energy may enjoy upside.
• Investors need to stay on their toes as conflict zones tend to be fluid in nature.

Following the blistering record in size, scope and pace of new public listings in the past two years, 2022 had the unenviable task of being the follow-up act to a banner performance. Unfortunately, a devastating duo of multi-decade highs in inflation combined with Russia’s dangerous decision to invade neighboring Ukraine all but plundered sentiment for fresh publicly traded equities.

Given the unfathomable circumstances, it’s no shock that Wall Street shied away from untested opportunities. According to data compiled by Statista.com, the share of U.S. companies that were profitable after their initial public offering (IPO) has been dropping since reaching a decade high of 81% in 2009. In 2020, this metric slipped to a staggeringly low 22%, boding poorly for capital-seeking enterprises under the best of circumstances. Understandably, even prominent organizations have pulled out of their IPO plans, with business leaders seeking a more favorable environment to go public.

Still, certain sectors may be able to move against the grain, which is why Excelerate Energy Inc. has been generating buzz on the street. One of only two companies to go public the week of April 11, 2022, Excelerate commands an advantage in that its core business involves liquified natural gas (LNG), a critical commodity made all the more relevant from the geopolitical paradigm shift.

What Does Excelerate Energy Do?

As a specialist in floating LNG terminals — or offshore facilities that manage the production, storage and offloading of that commodity — Excelerate Energy already enjoyed tremendous importance to the global energy distribution network prior to Russia’s attack on Ukraine. However, the invasion brought new urgency to the company that, while cynical, may gift its management with an unprecedented opportunity.

Although a crisis, the scope of the eastern European flashpoint imposes net negatives on affected parties that some sectors may advantage. For instance, the COVID-19 pandemic harmed most industries yet immediately bolstered telehealth companies like Teladoc Health Inc. (NYSE: TDOC). Therefore, the same logic could apply to Excelerate as the conflict forces a serious discussion about energy dependencies.

For Excelerate specifically, the company’s upcoming IPO delivers multiple advantages that could potentially enrich prospective takers:

• Size advantage: Commanding the largest portfolio of floating LNG terminals worldwide per its website, Excelerate will likely attract interest among investors because of its market leadership.
• Proven track record: Thanks to its safety record and ability to build and operate complex projects, the LNG specialist can potentially fill gaps from Russo-Ukrainian conflict.
• Resilience under pressure: Unlike other energy firms, Excelerate has years of experience operating in diverse environments, affording the company a flexibility that should attract a premium under the current volatile circumstances.
• Focus on sustainability: While LNG outfits are not known for their environmental, social and governance (ESG) profile, Excelerate aims to shift this long-standing narrative through empowerment and development of local workforces.

Among the key statistical highlights of Excelerate are its 60-plus years of combined customer regasification experience, a record transfer of more than 236 million cubic meters of LNG and the ownership of 10 floating storage and regasification units (FSRUs) — one of the largest fleets in the industry.

Excelerate Energy IPO

Excelerate Energy went public April 13, 2022. Excelerate’s equity shares trade on the New York Stock Exchange under the ticker symbol EE. Excelerate received net proceeds of approximately $416.2 million. They closed their initial public offering of 18,400,000 shares of its Class A common stock.

Barclays (NYSE: BCS), JPMorgan Chase & Co. (NYSE: JPM), Morgan Stanley (NYSE: MS), and Wells Fargo & Co. (NYSE: WFC) represented the joint bookrunners for the IPO. Prospective participants should note that the underwriters have an overallotment purchase option of an additional 2.4 million shares. As well, Excelerate’s new listing is poised to be the first $100 million-plus IPO in over two months.

What Analysts Had To Say About Excelerate Energy IPO

Since the end of World War II and particularly following the collapse of the Soviet Union, the modern global order eschewed military force for diplomatic solutions to geopolitical conflicts. Sadly, the unilateral decisions of Russian President Vladimir Putin completely shattered this framework, forcing the international community into a new paradigm.

As it stands, the coerced transition of the global order may radically benefit EE stock. According to a Reuters report in early April, “U.S. investors have targeted names with LNG exposure since the invasion, betting these companies will benefit from Western sanctions on Russia, which supplies Europe with between 30% to 40% of its gas.”

Because of this suddenly favorable backdrop, EE stock could enjoy a sizable rally following its public market debut. Per Reuters, Excelerate generated about 40% of its revenue from the Americas last year, followed by Asia Pacific and the Middle East and North Africa. Since the invasion, it has had more inquiries from countries traditionally dependent on Russian gas imports, the company said in an updated filing with the U.S. Securities and Exchange Commission (SEC) on Monday.

While tied to a compelling storyline, EE stock isn’t without risks. For instance, the company primarily operates in Brazil, Argentina, Israel, United Arab Emirates, Pakistan and Bangladesh. Thus, it may incur a transitional process to pivot to European customers. As well, Excelerate is tied to few customers, posing diversification risks should the Europe-focused tailwind not pan out.

Ironically enough, the geopolitical flashpoint may also end up being the catalyst for the ultimate erosion of EE stock. True, hydrocarbon energy sources are invariably pertinent because of their high energy density. But the crisis in Ukraine also forced European leaders to think in terms of longer-term ambitions, particularly those related to clean and renewable energy sources.

According to the Yale School of the Environment, Russia’s reckless decision to wage war against its neighbor has led to the European Union fast-tracking its renewable energy ambitions, including plans to triple the region’s renewable energy capacity by 2030. If successful, this initiative could dent Russia’s ability to militarily influence global politics. At the same time, EE stock could find itself on the outside looking in.

Excelerate Energy Financial History

With the world community gradually recovering from the COVID-19 pandemic, Excelerate Energy was poised to deliver strong results — and the company didn’t disappoint. Now, because of the crisis in Ukraine, chances are high that 2022 could be a banner year for the LNG company, drawing intrigue for its upcoming IPO.

According to its regulatory filings, Excelerate posted revenue of nearly $889 million last year, comprising of $468 million in sales associated with FSRU and terminal services and $420.5 million in gas sales. In 2020, the company generated revenue of $430.8 million, although it lacked gas sales at the time.

More importantly, Excelerate runs a profitable venture, with net income in 2021 registering to the tune of $41.2 million. In the prior year, the LNG firm produced net income of $32.9 million.

Excelerate Energy Potential

Arguably, Excelerate Energy enjoys more positives than negatives regarding its upcoming IPO. For starters, the Kremlin’s shocking decision to launch an all-out attack on Ukraine — a country with which Russia shares many cultural and ethnic similarities — forced a dramatic rethink in European strategies. Now, the goal is for the west to completely delink itself from Russian energy imports by 2027, a narrative that inherently favors EE stock.

As well, Excelerate’s public market debut offers administrative benefits, bringing a viable IPO to retail investors. Denied interesting opportunities this year stemming from myriad headwinds, it’s quite possible that market participants are ready for positive changes.

Still, EE stock isn’t without risks. Primarily, the pivot away from Russian energy supply chains may not be as easy as it appears on paper. Further, a deteriorating global economic environment — a non-zero probability given China’s decision to shutdown Shanghai because of COVID-19 risks — may threaten Excelerate, irrespective of the Ukraine conflict.

Where to Buy Excelerate Energy IPO Stock

Because of the tight timeline, interested investors will likely have to buy Excelerate shares in the open market, necessitating knowing how to buy stocks. But before taking that step, you must have a trading account. Below is a list of best brokers to consider.

EE Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

EE Pre-IPO

Unfortunately, the pre-IPO phase for EE stock has passed. However, those interested in early-bird opportunities can check out Freedom Finance and its pipeline of upcoming IPOs.

Frequently Asked Questions