Glencore Earnings Take It To Post-IPO Lows

Glencore International (LSE: GLEN) was supposed to be a hot IPO in the world of commodities.  It turned out that it caught a serious downward trend in the stock market, some commodity bubbles were having the air let out of them, and the currency markets have been in a state of flux.  Now its earnings report took shares to its lowest level since its IPO.

This was Glencore’s first earnings report and shares fell 4.4% to 500.00 pence in U.K. trading today.  Now its shares have a post-IPO range of 500.00 to 559.16 after a pricing of 530 pence, so shares are down more than 10% from their peak.  The company’s IPO raised the equivalent of $11 billion for roughly a $59 billion valuation.  That is 10% less now as well since its IPO on May 19.

What is a bit sad is that Glencore’s net rose about 47% and it earned close to $1.3 billion in the quarter after you translate to dollars (much of its business is in dollars).  EBIT income (earnings before interest and taxes) was up 45% to $1.8 billion.  A gain accounted for some of the income, but the rise in sales was by almost 40% to north of $44 billion.

We have seen at least two research report summaries that took Glencore’s earnings report as a disappointment.  Our question is how much might have been too relied upon by the analyst community from the IPO roadshow.

Glencore may have a couple of quarters of growing pains and “market adaptation time” before analysts truly know what they are looking for in real expectations.  This will also be time needed for Glencore to figure out how to act like a public company rather than a private company that owns hard assets and public shares of other companies.  Now the company also has a currency for it to do deals when and where it sees fit.

Many U.S. investors wanted to be able to get in on this IPO but could not or did not know how because the listing was in London.  Imagine that a big disappointing IPO somehow missed the U.S.

JON C. OGG