Glencore International had a fairly strong debut in London Thursday morning, rising about 3 per cent in unofficial trading as the world's biggest commodities trader joined the stock market. It also turned its partners, led by CEO Ivan Glasenberg, into Europe's newest billionaires or multimillionaires.
Glencore sold 1.14 billion shares at £5.30 each (about $8.60 U.S.), raising about $10-billion, making it the biggest initial public offering so far this year. The share price came at the mid-point of Glencore's original range, but slightly less than the guidance price issued early this week.
The company scaled back its price ambitions a bit to help ensure investors would not be disappointed on the first day of trading after several weeks of wild swings in the commodities markets. Glencore's bosses, however, might have been disappointed by the rise; they were reportedly hoping for a pop of 5 per cent to 10 per cent.
The IPO valued Glencore at £36.7-billion, or just short of $60-billion, and ends the company's four decades as a private partnership, one that valued its secrecy as it became a major trading force in oil, coal, grains and other commodities. Glencore's goal is to use premium-rated shares as an acquisition currency in the belief that commodity prices will keep rising as emerging economies suck up resources to fuel their growth.
"It seems like a golden goose day for Glencore, but unlike folklore, we do not see this goose being killed off," said Miriam Hehir, a director of RBC Capital Markets in London.
Liberum Capital of London, one of the banks advising Glencore, said that the listing could mark the end of the "mini sell-off in both the sector and broader commodities."
Mr. Glasenberg, the South African accountant who has been CEO since 2002, said in a statement Thursday morning that "Glencore's offer has seen substantial interest from investors around the world and was significantly oversubscribed throughout the price range providing Glencore with a high quality, diverse and geographically spread investor base."
The IPO is worth about $9-billion for Mr. Glasenberg, who is Glencore's biggest shareholder.
Glencore shares, which were also sold in Hong Kong, begin "unconditional," or official, trading on May 24, the day the company will join the FSTE-100 index. It will become the first company in 25 years to join the index on its first trading day.
Glencore's predecessor company was founded in 1974 by Marc Rich, who would later become a U.S. tax fugitive. He was pardoned by Bill Clinton on his last day in office as U.S. president in 2001. Mr. Glasenberg and his partners bought the trading business from Mr. Rich in 1993 and turned it into a most powerful commodities trader. Along the way, it picked up a broad portfolio of hard assets and working mining companies, including a 34 per cent stake of Xstrata, the Anglo-Swiss mining group that bought Canada's Falconbridge in 2006, and 9 per cent of Rusal, the Russian aluminum giant controlled by Oleg Deripaska.
There has been talk, not denied by Glencore, that it would like to move quickly on the acquisition front. One of its rumoured targets is Louis Dreyfus, the privately owned French agriculture commodities trader.