Glencore’s earnings crash shows this was definitely an IPO worth avoiding

March 5, 2013
March 5, 2013

Commodities giant Glencore is well known for its trading savvy. And a common point analysts raised just before its 2011 IPO was that Glencore’s majority shareholders may be selling out because they predicted the world resources “supercycle,” as commodities bulls used to call it, was about to be punctured.

Glencore’s 2012 earnings, released today, will have its IPO cynics chuckling at the prescience of their foresight. Last year, Glencore’s net income crashed 75%. That was partly because of a decline in the value of Glencore’s stake in Russian aluminum producer Rusal, but generally because its sales prices declined as China’s growth slowed.

While the London and Hong Kong flotation made paper billionaires of Glencore’s bosses, it’s not at all provable that CEO Ivan Glasenberg saw into the future with mystic accuracy before selling part of his company to outsiders. Maybe he just wanted to spread the fruits of his company’s success more widely and was as surprised by the supercycle accident as many others in the resources industry (paywall). And Glasenberg, who remains Glencore’s largest shareholder, has suffered paper losses from his company’s poor share price performance and will need to boost the share price again to increase his own wealth.

Still, the $173 million dividend the Glencore CEO will reap for 2012 should soothe any pain he feels from the value of his stake in the company shrinking.

Here is what has happened to Glencore’s London share price (blue line) since its stockmarket debut and with the overall performance of the FTSE 100 (yellow line) provided for reference. Ouch.

Screen Shot 2013-03-05 at 21.50.24

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