Steven Kalmin, CFO of Glencore, has been busy mending relations with bruised investors,who bought stock in the company’s May IPO at 530p and saw the price sink as low as 350p amid the global equity market rout in August.
Euromoney caught up with Kalmin in mid-September, and will publish a full narrative of the extraordinary deal, and a perspective on it, in the October edition.
“In the main, investors are still supportive and philosophical about [the IPO],” says Kalmin. “It’s important to also look at the movement on a relative basis and over a longer period, as we’ve been in the midst of a risk-reduction phase since June and July. Almost all of our top shareholders have continued to maintain their sizeable presence on our share register since the time of the IPO.”
Looking back at the record-breaking IPO, he says: “We never intended to be aggressive on price and leave a bad taste in anyone’s mouth. It was always the plan to leave some money on the table. We felt it was priced fairly at the time, taking into account the market and shape of the book, which was heavily oversubscribed at every point in the price range. However, complete visibility on markets is often a challenge.”
In the second week of September – as investors’ fears over the outlook for the world economy drove volatility across risk asset classes and closed out all but the highest quality names from new issues – First Reserve, the US-based private equity firm, took the capital markets by surprise.
The leading private investor in the global energy industry engaged Credit Suisse and Morgan Stanley to sell off, through an accelerated bookbuild, its entire holdings of Glencore convertibles. First Reserve had paid $800 million for the biggest single position in Glencore’s $2.3 billion pre-IPO convertible in December 2009. Now it cashed this in, raising some $1.1 billion.
It immediately ploughed this cash back into Glencore equity, bidding a premium to the previous close of 406p and acquiring 141 million shares at 425p. In a volatile stock market, First Reserve wanted none of the downside protection but rather a pure play in the equity risk of the company. First Reserve wanted fully loaded equity risk and bought plenty of it from takers of the convertibles, who sold equity in return.
“This is a strong statement of support for Glencore by a very prominent investor in the natural resources sector,” says Michel Antakly, managing director in the investment banking division at Morgan Stanley, which was one of three global coordinators on the IPO of the Swiss-based commodities trader and mining company.
Glencore’s share price closed up 7 percent on announcement of the trade, and touched 450p a fortnight later on September 19. Following the First Reserve trade, news broke that Glencore’s chief executive Ivan Glasenberg was also spending £20 million – spare change to him, no doubt, after the company’s dividend payout – to add more Glencore stock to his already sizeable personal exposure.
Time will tell whether the First Reserve switch from convertibles to stock marks a new turn in Glencore’s share price and ushers in a period of sustained outperformance against the broader market and sector peers. The Swiss firm’s management must fervently hope that it does. But equity markets remain volatile. Glencore’s stock slipped again towards the end of the month and hit 403p as the FTSE whipsawed.
See more:
How do you fix the IPO market?
European IPOS dogged by poor performance
Abigail with Attitude: Glencore – I told you so
