Glencore, the trading house that made billionaires of its top executives in a recordbreaking flotation four years ago, lost up to a third of its market value in frenzied trading as fears of a
prolonged commodity downturn mounted.
Shares in the UKlisted company, whose rise came to symbolise the decadelong commodity boom, suffered their biggest fall to a record low of 67p after analysts at one investment
bank said Glencore’s equity value could be wiped out if metal prices remained at current levels. Its stock closed down 29 per cent at 69p.
The share price rout is another blow to Ivan Glasenberg, the pugnacious Glencore chief executive, who took the company public and transformed it into one of the world’s biggest
miners through the acquisition of Xstrata in 2013, but also left it saddled with big debts.
Glencore has been the biggest faller on the FTSE 100 this year, losing more than 77 per cent. The latest fall took Mr Glasenberg’s stake below £1bn in value yesterday for the first
time, reducing it to £850m ($1.29bn). Nearly 300m shares changed hands almost four times the daily average. It was the highest turnover since it listed at 530p in May 2011.
Concern about a slowdown in China has hit the mining sector hard, with demand slowing just as years of investment in new production brings a glut of supply on to world markets. The
price of many raw materials, including copper, coal and oil all commodities that Glencore produces and trades are close to their lowest levels since the financial crisis.
The share prices of other big mining houses, such as AngloAmerican, BHP Billiton and Rio Tinto, have been dragged down but not as dramatically as Glencore’s.
Glencore has suffered most because of concerns over its high levels of debt, which stand at almost double its market capitalisation of $16bn.
Analysts at Investec, who wrote the report, yesterday warned that if commodity prices stayed at current levels a much greater percentage of Glencore’s earnings would be needed to
service its debt.
“If commodity prices don’t appreciate where does that leave shareholders?” said Investec analyst Hunter Hillcoat. “At current spot prices, all else being the same, Glencore’s equity
value is zero.”
Glencore declined to comment on the share price fall and the report. But a person familiar with its operations expressed doubt over the Investec claims, forecasting earnings of $8bn
before interest, tax, depreciation and amortisation this year at current commodity prices.
Bankers said the company’s credit lines would not be affected by the plunge in the share price.
Glencore says it is being used by hedge funds as a proxy to bet against China, with money managers taking short positions because of its exposure to copper one of the building
blocks of China’s decadelong industrialisation.
David Sheppard, Neil Hume and James Wilson
Additional reporting by Miles Johnson and Joel Lewin
