SHOW OF CONFIDENCE
Glencore managers surprise industry by raising their bets in the company
FOUR years after a stock market listing made them billionaires, and months after the last ban on them selling shares expired, most Glencore managers are still sticking with their boss Ivan Glasenberg – and preparing to invest more in the firm.
The loyalty comes as a surprise to many industry players, particularly in light of the company’s woes which forced it to suspend dividends this week and announce plans to sell new shares to cut its $30 billion (R406bn) debt pile.
Rivals and hedge funds had already long bet the managers – some of the world’s top traders like Alex Beard for oil and Tor Peterson for coal – would be unable to resist the temptation to cash out after decades of service for the commodities giant.
New equity issue
“I had been honestly thinking most guys would be somewhere like in the Bahamas by now. It is quite extraordinary that most of them are still around,” a senior executive at one of Glencore’s trading rivals said.
At the time of the $10bn London flotation in 2011, a possible exodus of management was a big concern among potential investors, so Glencore imposed bans – or lock-ups – on selling shares for stipulated periods after the listing.
The last of these expired in May, apart from those constraining the chief executive and finance chief – but not only have most of the directors held onto their shares, they plan to buy more in the new issue to prevent their stakes being diluted.
“We had calls from hedge funds recently asking if Alex or Tor or somebody else sold out. No one did. And everyone will be investing in a new equity issue,” a high-level source at Glencore said.
Plans for the $2.5bn issue were announced last week as the mining and trading firm acknowledged the severity of a commodity market slump, but the timing and shape of the issue have yet to be decided.
“What we said to shareholders is that we do not wish to be diluted. Any type of capital raising we do, the senior partners will be participating. We think that is the way to go,” Glasenberg said.
Glasenberg is known for running Glencore with an iron fist and pushing through decisions, like he has done with most other crucial moves, such as the $29bn acquisition of Xstrata in 2012.
There is a rationale for a concerted show of confidence in Glencore’s stock, which has fallen to record lows this month – down more than half this year – on fears of a major economic slowdown in China that would hit commodities. It is designed to show that most veteran managers believe the company is seriously undervalued and stock prices will bounce back once commodities market stabilises.
One could also argue the directors became hostages of the market downturn and that the stock has fallen so sharply that there is no point in selling out.
At Thursday’s share price of £1.36 (R28.36), Glasenberg with 1.1 billion shares remains the only senior manager whose stake’s paper value tops $1bn. – Reuters