There’s nothing like a good rumour to send stock markets wild with excitement. Glencore’s shares rocketed more than 70% in Hong Kong before see-sawing back down, after a report that its management would be open to takeover offers.
The beleaguered commodities trader ‘would listen to offers’, but doesn’t think there are any buyers out there at the moment willing (and, one would think, able in an era of falling commodity prices) to pay what they see as a fair price, according to The Sunday Telegraph.
That sent its shares (which are traded in relatively lower volumes in Hong Kong) bouncing as high as HK$18.36 (£1.56), before they fell back to HK$12.60. They then opened 20% higher in London, then dropped sharply to trade around 8.6% higher at 103.2p in mid-morning trading.
The company put out a statement to the Hong Kong stock exchange noting ‘today’s increase in the price and trading volume of the shares.’ It chose to ignore the Sunday paper, saying it didn’t know of ‘any reasons’ for the wild gyrations.
The mega-miner has been on a wild ride of late. Last Monday, a number of analysts questioned its ability to pay down its $30bn debt pile if commodity prices, which have taken a hit from China’s slowing economy, keep falling. Its shares duly plunged 28% in a single day. They have since recovered somewhat, but Glencore has, nonetheless, lost two thirds of its value in the last six months.
In a bid to reduce debt by $10.2bn, the company suspended dividend payments and launched a $2.5bn rights issue last month. It also wants to raise $2bn by selling a minority stake in its agricultural business, although Numis Securities’ Matthew Hasson said today ‘the more likely scenario’ would be it selling the whole thing for around $7bn.
Nonetheless, its in-house broker Citigroup has suggested going private could be a viable option for the ailing trader. Chief executive Ivan Glasenberg has apparently rubbished this option, according to the Telegraph. It’s probably at least partly a matter of pride for the Australian-Israeli-South African-Swiss executive, given he took the company public in 2011 and then engineered its $30bn takeover of Xstrata.
But Glasenberg has lost almost three-quarters of the $7.3bn paper fortune he netted from Glencore’s IPO, according to Forbes. He also has to reassure Qatar Holdings, which is reportedly feeling ‘raw’ over the reduction in value of its 9% stake in the company. With the Chinese economy likely to slow further, the commodities ‘supercycle’ may well not even have bottomed out yet. Don’t count anything out when it comes to the ailing giant’s future.