Glencore shares collapse leaves wealth funds with big losses

But while analysts and investors were trying to figure out how trading could save a company in crisis, several traders were leaving the firm after what industry sources said were trades that failed to reward the big risks taken and the large amounts of capital employed.

“Miners grew hugely to meet the demand from China and they borrowed heavily to find it and the cost of servicing that debt and the schedule of repayments are really putting companies such as Glencore under the spotlight”, said Laura Lambie, Senior Investment Director at Investec.

It’s safe to say the nearly 30% plunge in Glencore’s shares to a record low on Monday has laid to rest any hope that the mining and trading company had of pulling off a merger deal with Rio Tinto, which is vying with Brazil’s Vale for the title of the world’s largest iron ore producer.

The implosion of mining giant Glencore’s stocks on Monday has given CEO Ivan Glasenberg’s wealth a serious kicking, after shares tumbled 29.42%. “In the event the equity market continues to express its unwillingness to value the business fairly, the company management should take the company private, whereby restructuring measures can be taken easily and quickly”.

The view was echoed by analysts at Jefferies, who said in a note that Glencore must act urgently to “stop the bleeding now”, given that investors believe that highly leveraged miners could lose all their equity value if commodity prices fall even slightly and don’t recover.

At the end of last year, Ipic’s accounts showed it owned 0.75 per cent of Glencore with a carrying value of just over $460m, down from about $512m at the end of the previous year. Citi is a co-broker of the sale and said that “the level of interest is likely to be high”.

It’s unlikely that Glencore’s credit rating will be cut below investment grade, Citigroup said.

Glencore has also won support from analysts at Citi, the bank that helped the company to float in 2011.

But it has become apparent that the market does not really know how to value the commodities marketing, distribution and trading businesses. “That’s true, but commodities prices are out of their control”.

Shares for Glencore are down almost 90 percent since the company’s listing in 2011, and Glasenberg’s fortune are following suit. The stock has declined 77 per cent this year, the worst performance in the U.K.’s benchmark FTSE 100 Index.