{"id":428033,"date":"2011-05-22T06:00:00","date_gmt":"2011-05-22T06:00:00","guid":{"rendered":"http:\/\/www.ghanamma.net\/2011\/05\/22\/glencore%e2%80%99s-record-ipo-makes-muted-debut\/"},"modified":"2011-05-22T06:00:00","modified_gmt":"2011-05-22T06:00:00","slug":"glencores-record-ipo-makes-muted-debut","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2011\/05\/22\/glencores-record-ipo-makes-muted-debut\/","title":{"rendered":"Glencore\u2019s record IPO makes muted debut"},"content":{"rendered":"

\n<\/p>\n

Commodities trader Glencore made a lukewarm market debut on Thursday that handed it currency for future acquisitions, with its shares struggling to break much above its widely expected launch price of 530 pence, Reuters reported.<\/span><\/p>\n

Initial grey market, or conditional trading showed more than 530 million shares changed hands during the day for as much as four per cent above the offer price.<\/span><\/p>\n

Despite this appetite for the stock, with many investors left out of the offering after Glencore was flooded with orders for its shares, by the market close the shares had pared those gains to end back unchanged at 530 pence.<\/span><\/p>\n

Glencore, the world\u2019s largest diversified commodities trader, had said there was strong demand for its stock and had enough buyers to cover its offering of up to $11bn within hours of starting the sale process earlier this month.<\/span><\/p>\n

By the time order books closed a day earlier than originally planned on Tuesday, it had enough orders to cover its offer more than four times, according to one source close to the deal, meaning it received orders totaling more than $40bn.<\/span><\/p>\n

Some investors, however, have said strong demand in London\u2019s largest ever public offering was largely due to the relatively small amount of shares made available after the allocation of shares to \u201ccornerstone\u201d investors and the sheer size of the group, which has qualified the shares for inclusion from next week in London\u2019s FTSE 100.<\/span><\/p>\n

At the offer price of 530 pence, Glencore has a market value of \u00a336.7bn ($59.3bn). It will be the fifth-largest mining-related firm on the London exchange.<\/span><\/p>\n

\u201cThe share price range was too high, full stop, as far as we were concerned,\u201d said one UK equities manager, at a house running more than 200 billion pounds of assets.<\/span><\/p>\n

\u201cPut another way, had this been a 500 million-pound company, it would have had no chance of achieving the rating it is floating on.\u201d<\/span><\/p>\n

Glencore, which is also floating in Hong Kong, will be listing a 16.4 per cent stake, assuming no overallotment and no conversion of its convertible bonds. Its current shareholders, including Chief Executive Ivan Glasenberg, will retain a stake of around 80 percent.<\/span><\/p>\n

Many investors have also expressed concern over the outlook for commodities, particularly after this month\u2019s sell-off, and fretted over the discounts that should be applied to take account of Glencore\u2019s conglomerate structure and the fact it has operated largely away from the public eye for 37 years.<\/span><\/p>\n

The pricing decision came after fund managers said any price above 535 pence could see the shares drop in the immediate aftermath of the listing.<\/span><\/p>\n

The group\u2019s top executives and cornerstone investors are tied in through lock-ups of at least six months, but share performance will matter to Glencore, particularly if the company is to use the offering as planned to pursue acquisitions, not least a potential offer for peer Xstrata.<\/span><\/p>\n

That deal — or at least a solution for Glencore\u2019s 34 percent stake in Xstrata — is widely expected. A merger between Glencore and Xstrata would be the biggest ever mining takeover.<\/span><\/p>\n

But Glencore will also pursue other deals. It has made no secret that acquisition firepower is one of the main motivations behind its decision to relinquish its fiercely guarded tradition of privacy and discretion, and has no plans to abandon the opportunistic dealmaking that has made the company\u2019s fortune.<\/span><\/p>\n

Analysts on Thursday said the 530 pence per share level was realistic and should mean strong aftermarket support.<\/span><\/p>\n

\u201cObviously everything is priced to do well. I don\u2019t know whether five to ten percent upside is in the bag or not, but certainly they are trying to please investors with the price,\u201d analyst Tim Dudley at Collins Stewart said.<\/span><\/p>\n

\u201cI get the impression that on a demand\/supply basis there is a lot of interest in the stock and people have probably been scaled back. Whether people will rush to try and sort out that imbalance today or wait and buy over time it is hard to say.\u201d<\/span><\/p>\n

One source close to the deal said demand from index tracker funds would not kick in until next week, providing a potential extra boost for the stock.<\/span><\/p>\n

\u201cIf you give away two or three per cent with some passive demand support still to come through, I think that is pretty smartly priced,\u201d the source said.<\/span><\/p>\n

Liberum, one of the banks advising Glencore, said in a morning note that the listing could mark the end of a \u201cmini sell-off in both the sector and broader commodities.\u201d<\/span><\/p>\n

Glencore\u2019s market value will propel it straight into the FTSE-100 index after unconditional trading begins next Tuesday, making it only the third company ever to do so.<\/span><\/p>\n

With a 10 per cent overallotment option likely to take the total size of Glencore\u2019s offering to $11bn, it is set to be London\u2019s largest-ever listing, overtaking Russia\u2019s Rosneft, which raised $10.6bn in 2006.<\/span><\/p>\n

It is already the biggest ever on the so-called premium listing segment of the London bourse.<\/span><\/p>\n

The 23 banks working on Glencore\u2019s float will get a cut of the biggest fee pot in at least a decade, potentially totaling $275m if the commodities trader raises the full $11bn, and a full commission of $82.5m is paid out.<\/span><\/p>\n

Citigroup, Credit Suisse and Morgan Stanley are the joint global coordinators for the offer, joined by another 20 banks in lower ranking syndicate roles.<\/span><\/p>\n

Unconditional trading begins on Tuesday in London and Wednesday in Hong Kong, where Glencore is also listing.<\/span><\/p>\n

The Hong Kong allocation of the offer is 2.7 per cent, with shares priced at HK$66.53.<\/span><\/p>\n<\/div>\n<\/p>\n

View article:
\nGlencore\u2019s record IPO makes muted debut<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Commodities trader Glencore made a lukewarm market debut on Thursday that handed it currency for future acquisitions, with its shares struggling to break much above its widely expected launch price of 530 pence, Reuters reported. Initial grey market, or conditional trading showed more than 530 million shares changed hands during the day for as much as four per cent above the offer price. Despite this appetite for the stock, with many investors left out of the offering after Glencore was flooded with orders for its shares, by the market close the shares had pared those gains to end back unchanged at 530 pence<\/p>\n","protected":false},"author":0,"featured_media":428017,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":{"0":"post-428033","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-sports"},"yoast_head":"\nGlencore\u2019s record IPO makes muted debut - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2011\/05\/22\/glencores-record-ipo-makes-muted-debut\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Glencore\u2019s record IPO makes muted debut - Ghanamma.com\" \/>\n<meta name=\"twitter:description\" content=\"Commodities trader Glencore made a lukewarm market debut on Thursday that handed it currency for future acquisitions, with its shares struggling to break much above its widely expected launch price of 530 pence, Reuters reported. 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