London is mentioned in passing but we wonder if a dual listing here and in Switzerland is the most likely option.
A flotation in the US, of course, would be deeply controversial given the, ahem, background of Glencore founder Marc Rich.
Wherever it does list Glencore is going to be a big, big company; analysts reckon it could be worth $30-$40bn.
In terms of market reaction, Reuters notes it has been positive.
RTRS-GLENCORE CDS TIGHTEN BY ABOUT 50 BPS TO 625 BPS.
2013 BONDS RISE 3 POINTS TO 84 PCT BID -TRADER.
Analysts, meanwhile, are perhaps less aghast than us that Glencore is considering a stock market listing. Here’s the mining team at Liberum Capital, who claim Glencore has already appointed City spinners Finsbury as their PR advisers.
They say it is pretty clear that access to external and public sources of capital has becoming a pressing issue for a number of reasons.
First the partnership structure becomes unsustainable when such huge wealth (Glencore’s value could be $30-40bn?) is concentrated in such a narrow band of partners. When a generation that have built the business wants to leave in the next decade or so, where will the capital come from to buy them out of the partnership? New partners certainly can’t afford to buy their equity.
Glencore is almost a quasi public company already and this has lead to issues for the company. It has traded debt and CDS instruments which famously traded appallingly in the face of the crash of Q4. Management were unaccustomed, unable and unwilling to fully address market concerns over these issues at the time, which threatened their ability to trade.
In times of stress — access to permanent capital can help hugely. Being able to raise equity to recapitalise or to assist in the re-capitalising of their associate Xstrata is a key prerogative. The sale of Prodeco with a call option as the funding mechanism by which Glencore could afford to subscribe for rights was not something that either Glencore or Xstrata enjoyed doing. Being able to access permanent capital will lead them away from having to do bartered trades with Xstrata when XTA need capital.
Nonetheless, we wonder how Glencore will adapt to life as a listed company and all that entails – conference calls with analysts and the press, interim managements statements, annual reports, the Takeover Panel – and, er, Markets Live…
Glencore – Lex