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Glencore tanks on bearish Investec note

Sep 28 2015 12:01
Glencore CEO Ivan Glasenberg.

Glencore CEO Ivan Glasenberg. (File, AFP) (AFP/MIKE CLARKE)

Company Data

GLENCORE PLC [JSE:GLN]

Last traded 27
Change -1
% Change -3
Cumulative volume 1358763
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - Glencore, the miner and commodity trader headed by billionaire Ivan Glasenberg, dropped as much 17.4% in London, the biggest one-day drop since the company started trading in 2011.

The JSE-listed shares tracked the London losses and by 11:42 the shares were down 17.42% at R17.30.

The company has lost more than 70% of its value this year as commodity prices have slumped, making it the worst performer in the FTSE 100 index and the JSE.

Glencore's drive to sell assets to cut heavy debts failed to soothe fears over slumping metals prices.

Traders cited a bearish Investec note that raised doubts over Glencore's valuation if spot metal prices did not improve. The note pointed to high debt levels at the company.

Glencore [JSE:GLN] earlier this month sold $2.5bn of new shares to pay down debt to help protect its credit rating amid a rout in commodities prices.

Glencore sold the stock at 125 pence a share, a 2.4% discount to the closing price on Tuesday, 15 September. Glasenberg paid about $210m to buy shares in the sale in order to maintain his 8.4% stake, honouring a commitment that he and other senior managers representing 22% of the company wouldn’t dilute their holdings.

Glasenberg was responding to investor concern that a debt- laden balance sheet can’t withstand the slump in commodity prices. The share sale is part of a wider $10bn debt-reduction programme on 13 September, which saw the company scrap dividends and plan asset sales to cut its $30bn of borrowings.

“The challenging environment for mining companies leads us to the question of how much value will be left for equity holders if commodity prices do not improve,” Investec said in a note to investors Monday.

The bank said that if major commodity prices remain at current levels, almost all Glencore’s equity value would evaporate in the absence of substantial restructuring.


glencore  |  commodities  |  mining
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