Analysts at Citigroup investment bank said Glencore founder Ivan Glasenberg should perform a U-turn and take the company private if the shares continue to plunge.
The call follows the most tumultuous day in Glencore’s five-year spell on public markets as the FTSE 100 company sank a staggering 29 per cent. The fall followed a note from Investec which said the shares could be worthless.
Glencore has been at the eye of the storm over its exposure to a slowing Chinese economy and its $29.5 billion (£19.5 billion) debt pile, which the Swiss-based company has been forced by shareholders to slice with a series of self-help measures to raise $10 billion.
The shares gained some respite from the battering today, rising 6.1p to 74.75p, but have still lost three quarters of their value this year. The firm is on the verge of joining the dreaded “90 per cent club” — companies worth just a tenth of their original float value — following their 530p float in 2011.
Heath Jansen, commodities analyst at Citi, was among a number of analysts who said the fall was “overdone”, adding: “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.”
Citi, along with Credit Suisse, is advising on the sale of a minority stake in Glencore’s agricultural arm to raise funds. The company is in talks with sovereign wealth funds and Asia-based trading houses over a deal which could value the whole company at $12 billion.
Other debt reduction measures have included suspending the dividend and a $2.5 billion placing completed two weeks ago. Jansen added: “While the market is clearly pricing in a downside scenario on the commodities, we believe the business will continue to show resilience through the cycle.”
Short-sellers have had the ailing giant in their sights for some time (see box), but UBS analyst Myles Allsop also said the stock was “heavily oversold”. “While the volatility in the share and concerns about management credibility is likely to put off investors near-term, we expect the share to re-rate over six to 12 months as management deliver on promises to cut net debt and as the copper price picks up.”
Glencore’s Hong Kong-listed shares also fell 28 per cent overnight, while the copper price in London hit the lowest level for a month at $4915 a tonne.