Back in 1993, a disastrous attempt to corner the world zinc market cost Glencore $172m (£113m) and nearly bankrupted the company.
According to separate sources, Glencore’s leadership have failed to reassure markets, which in part contributed to the company’s 29 percent plunge on the London Stock Exchange early this week.
The decline was triggered by predictions from the investment bank Investec that Glencore’s value would evaporate due to its mountainous debt pile if commodity prices continued to flatline.
Ivan Glasenberg, Glencore’s pugnacious chief executive, saw his 8.4 per cent stake drop below £1 billion in value for the first time since the company’s stock market listing in 2011.
“Under a spot scenario, we feel that Glencore may have to undertake further restructuring beyond the dividend suspension, capital raising and asset sales programs it has already announced”.
Investec analyst Hunter Hillcoat warned that Glencore could end up in the situation where it’s “solely working to repay debt obligations” if commodity prices don’t recover.
Now, I think the lessons here of Glencore are really important, even if your personal holdings don’t include commodities in general or Glencore specifically.
“One can not deny the fact that investors are – if the (Glencore) share price is telling you anything – extremely concerned about the near-term outlook”, Charles Stanley market analyst, Jeremy Batstone-Carr, said.
Glencore said it remains “confident the medium and long-term fundamentals of the commodities we produce and market remain strong into the future”. UK’s benchmark index FTSE 100 plunged 150.15 points or 2.52 percent to close at 5,958.86.
The correspondence, mailed by “reputation management experts” Schillings, stated that Glencore’s bosses were “extremely private individuals” and that any reports about their homes or private lives would pose a “security risk”.
Nowhere has this been made clearer than in Investec’s note released this morning, which stated that should these low raw-material prices continue, the company would offer little value for investors.
“There is no one really stepping in to do anything to stop the fall”, said the investor.
It might make sense to take Glencore private then.
But ongoing weakness in China and soft prices for commodities such as copper and zinc that central to Glencore’s earnings have scrambled the company’s efforts to boost confidence.
Liquefied Natural Gas down 6.4%. This was IBB’s worst single-day loss in more than four years.
President Barack Obama addressed world leaders gathered at the United Nations General Assembly on Monday.
Emerging equities dropped 0.8 percent while sovereign dollar bond yield spreads hit 6 1/2-year highs on doubts about the creditworthiness of commodity exporting countries and companies.
It all looks very different now, although the company refuses to comment publicly on its slumping shares.