Glencore revises IPO price on strong demand
Tuesday 17 May 2011
The commodities trading giant Glencore has narrowed the price range for its $11bn (£7bn) initial public offering this week, raising the mid-point – and the group's expected valuation – amid strong investor interest in the flotation despite the recent volatility in raw material prices.
The Swiss group, which owns about 34 per cent of the London-listed miner Xstrata, had previously indicated its shares would list at somewhere between 480p and 580p each. If the shares were to list at the mid-point, 530p, the business would be valued at about £36.5bn.
But yesterday it emerged that Glencore had narrowed the guidance for its blockbuster listing to between 520p and 550p a share, raising the mid-point to 535p and valuing the business, which will be dual-listed in London and Hong Kong, at closer to £37bn.
The move was seen as a reflection of strong demand from investors ahead of the start of conditional dealing in the trader's shares on Thursday. Because of its size, Glencore will be included in the FTSE 100 under the exchange's fast track rules.
The tighter pricing range suggests that investors have shrugged off the recent slump in commodity prices, which saw copper, oil and other key raw materials nosedive earlier this month. That fall followed a warning on prices from Goldman Sachs, one of Wall Street's most prominent commodity bulls, which recommended caution on raw materials in the short term.
Although it is at odds with the volatility in the commodity markets, the indication of strength chimes with comments last week from Glencore's chief executive, Ivan Glasenberg, who said the trading group had not "seen much pullback with the recent drop in commodity prices".
"We've had strong demand. I don't think we can say much more than that," Mr Glasenberg added.
The former coal trader, whose 15.8 per cent shareholding in the famously secretive business could be worth nearly £6bn after the float, sought to play down the significance of the recent commodity rout, saying that "a lot of what has happened ... is the froth" being blown off.
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