Glencore IPO: 5 things you don’t know about the world’s largest commodities trader

In the run-up to Glencore’s IPO date, here are five facts you probably don’t know about the world’s largest commodities trader.

Glencore’s IPO date is set for May 19, 2011, when the company’s stock will begin trading on the London Stock Exchange. A week later (on May 24 or May 25) Glencore stock will also start trading in Hong Kong. Here are five facts you probably don’t know about the world’s largest commodities trader:

1) Raw materials = massive profits. Last year, Glencore logged earnings before interest, taxes, depreciation and amortization (EBITDA) of $6.2-billion (per the Globe and Mail). Glencore makes its billions by having its fingers in lots of important raw materials pots from oil to coking coal, rice and aluminum. While it started strictly as a commodity trading firm, the company began acquiring ownership stakes in mines and agricultural producers during the late 1980s. With ongoing global currency debasement, profits at Glencore have mushroomed quickly. One of the company’s biggest assets comes in a 34.5 percent stake in UK miner Xstrata PLC (LON:XTA). Glencore’s proportion of Xstrata’s earnings amounted to $1.7 billion all by itself in 2010 (per the Financial Times).

2) Just how big is the world’s largest commodities trader? Ummm… quite big. Glencore International AG’s revenues hit $145 billion last year. Keep in mind, that’s revenue, not market cap. By comparison, the New York-based Goldman Sachs Group, Inc. (NYSE:GS) generated $49 billion in revenue last year and has a market cap of $79 billion. Pre-IPO, Glencore is one of the largest privately-held companies in the world. Forbes names the agricultural company Cargill as the largest privately-held company in the U.S. at the moment, and they estimate the company generated $109 billion in revenue last year. Glencore employs 57,500 people around the world. In a word, Glencore is massive.

3) Born in a four-room flat. Founded by trader Marc Rich and several colleagues, Glencore had a humble start in a tiny apartment in central Switzerland. The company was called Marc Rich + Co back then, and Rich is often credited with single-handedly founding the spot market for crude oil. The company was successful virtually overnight reaping $28 million in its first year trading minerals, metals and oil, according to Australia’s Sky News. The next year, Marc Rich + Co pulled in $50 million, and its continued growing remarkably ever since.

4) Instant billionaires. After digging through Glencore’s 1,600-page prospectus, Forbes has confirmed that the company will create at least six billionaires overnight when the company goes public. At the top of the list sits Glencore’s current CEO Ivan Glasenberg. Glasenberg will hold 15.8 percent of the company (1.09 billion shares) for a net worth of $9.5 billion. “I can’t think of any other IPO where an individual’s stake was valued this highly,” Jay Ritter, a finance professor at the University of Florida, told Bloomberg. Other instant billionaires include the directors and co-directors of various commodity departments, and Glencore’s CFO, Alex Beard, as well an unnamed mystery shareholder.

5) High risk, high rewards. Part of what’s made Glencore into the massive commodities titan it is today is the company’s propensity to take risks others are unable or unwilling to take. Their stake in Katanga Mining, which operates in the Democratic Republic of the Congo, is a prime example. Congo’s loaded with natural resources, but political instability in the region means some of that metal might never make it to market. Another London-listed mining company, First Quantum Minerals, was recently stripped of its copper mines by the DRC government (per the Financial Times). Katanga could suffer the same fate … or it could help make a fabulously profitable Glencore all the more appealing in the years to come. Investors will decide whether they want to go along for the ride in two short weeks.



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