Glencore begins official trading at discount
LONDON, England – Shares in the world’s largest commodities trader Glencore International PLC edged higher on their first day of public trading yesterday, but remained at a discount to their initial offer price amid speculation that commodities prices may have peaked.
Glencore raised US$10 billion in the largest ever international initial public offering, or IPO, on the London Stock Exchange, valuing the Swiss-based company at almost US$60 billion.
That made the secretive company, which also owns a number of mines worldwide, the first in 25 years to be fast-tracked into the FTSE 100 Index — bumping engineering firm Invensys to the FTSE 250.
Dubbed “the biggest company you’ve never heard of,” Glencore’s listing will add to a resources sector that already makes up around 15 per cent of the bluechip index.
Its importance to the market was underscored by the participation of its billionaire chief executive, Ivan Glasenberg, at the LSE’s market opening ceremony yesterday.
LSE Chief Executive Xavier Rolet said the listing “shows London is very much open for business and that its investor base has the appetite and capability to support large fundraisings.”
“Our pipeline is strong, and we look forward to welcoming further companies to our markets in the months ahead,” he added.
But the market launch coincided with sharp falls in commodities prices because of worries about Chinese demand and European economic recovery — putting the stock under pressure.
After hitting a low of 506 pence during grey market, or conditional, trading, it struggled to rise to its initial offer price of 530 pence per share. However, a slight rebound in commodities prices led shares to end the first day of trading up 2.1 per cent at 525 pence.
David Buik, an equities analyst at BGC Partners, labeled it a “muted performance,” but added that it “may be folly to forget that this company has been hugely profitable over the years, aided and abetted by its 35 per cent stake in Xstrata.”
“It may take some months to make some real progress, but few doubt its aspirations,” he said.
Glencore was founded in 1974 by Marc Rich, the fugitive trader who was controversially pardoned in 2001 by then United States President Bill Clinton just hours before he left office. Rich sold the company to its employees in 1994, and the firm has been at pains to distance itself from its founder and any whiff of improper activity, though environmental groups have since targeted the company for its mining interests.
The company is expected to use money raised in the listing to fund a buying spree.
Glasenberg told the Financial Times last month that it would make sense to fully take over Anglo-Swiss mining company Xstrata PLC, in which Glencore already has a 34.5 per cent stake. In its IPO announcement, the company also pledged to use some of the proceeds of the float to increase its stake in Kazakh zinc producer JSC Kazzinc to 93 per cent for US$3.2 billion in cash and shares.
Glencore already controls a large share of the global commodities business. Its 55,000 employees across 40 countries mine, farm, ship and trade essential raw materials needed to manufacture industrial goods from cars to consumer cereals.
The float made paper multimillionaires out of some 485 traders at the firm and a billionaire out of Glasenberg.