After a 29% plunge in the value of its shares on Monday, commodities trading firm Glencore has recouped most of its losses. The company, run by billionaire Ivan Glasenberg, rebounded over the past two days, with its gains at 30%. The roller coaster that Glencore has been riding continues to roll.
While the prices of commodities, particularly oil and precious metals, continue to tank, so has investor confidence in the firms that trade them. Glencore has been one of the hardest hit.
Earlier this month, Glasenberg bowed to shareholder pressures by agreeing to reduce the company’s debts and protect its ratings. Glencore also announced that it plans to suspend dividends, sell assets and raise cash in order to reduce its net debt by 30% by end of 2016.
Because of those measures and since the market continues to decline, Glencore’s investors have pushed management to make some kind of statement in order to calm fears.
In response, Glencore released a statement that, “We have positive cash flow, good liquidity and absolutely no solvency issues.” The company further stated that, “Glencore has no debt covenants and continues to retain strong lines of credit and secure access to funding.”
Glencore turned its private managers into billionaires when it went public in 2011. Many financial analysts who criticized the move said that the company should have remained private. Citi analysts recently wrote a note to its investor clients that, “In the event the equity market continues to express its unwillingness to value the business fairly, [Glencore] management should take the company private, whereby restructuring measures can be taken easily and quickly.”
Other analysts believe that Glencore will be just fine when the market eventually rebounds. They believe the recent slump in the company’s shares was excessive and that Glencore is currently undervalued. John Meyer, a mining analyst at SP Angel Corporate Finance LLP in London stated that, “The market got scared. It was Glencore’s flash crash based on momentum rather than reality. I think Glencore’s stock will continue to climb.”
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