There was initially talk of joint projects and investments to come between Glencore and Aabar. Glencore issued new shares at £1.25 (.90) earlier this month and Citi sets a target price of £1.70 ($2.58).
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Embattled Glencore reportedly held a secret meeting with an influential investor trade body yesterday over the commodities miner and trader’s £1.6bn share placing earlier this month.
We believe that 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, with a potential float of just the industrial business occurring further down the track.
Glencore backed up Citi’s comments by insisting in its statement that it had access to sufficient funds.
The biggest loser in Glencore’s collapse is its largest shareholder, Qatar Holdings, a unit of Qatar Investment Authority, which has a stake of more than 8 per cent.
CEO Ivan Glasenberg still owns just shy of 10% of Glencore, so the lower the price drops, the worse it gets for him. Those shares – and more than 13 billion others- closed at 68.62 pence per share in London on Monday, down 29% from Friday’s close.
“The challenging environment for mining companies leads us to the question of how much value will be left for equity holders if commodity prices do not improve”, Investec said in a note.
In recent weeks, Glencore CEO Glasenberg has tried to reduce the company’s debt by selling shares and assets, as well as scrapping a series of dividends. Copper and coal are both hovering near multi-year lows while iron ore and oil, which… The latter efforts have already run into headwinds because of the dire market conditions for commodities producers, largely because of the slowdown in China’s economic growth.
It was one for all Monday as fear about Glencore (GLEN.UK) earnings and its ability to pay debt decimated its shares and mining peers, too.
But it has become apparent that the market does not really know how to value the commodities marketing, distribution and trading businesses.
“Glencore is now under pressure to strengthen its balance sheet via asset sales or a capital injection, and time is of the essence”, Jefferies Group LLC said in a report on Tuesday.
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But shareholders are bearing the brunt of the company’s woes in the meantime.
