Glencore International PLC, St. Helier (OTCMKTS:GLNCY) CEO Ivan Glasenberg closed the biggest mining deal back in May 2013. He merged his firm with Xstrata in a deal valued at $29.5 billion and also won a boardroom fight to remain in control. At that time, he planned to acquire several mines across the world so as to extend his empire.
However, he also added a word of caution whether the commodity prices will remain strong in the coming years? This will largely justify putting funds into an asset-rich entity. Almost two years later, his fears have turned into reality as Glencore overall performance suffers due to rout in commodities prices including coal and copper.
The worsening performance
Glencore eroded $676 million in 1H2015, and its debt levels have increased to devastating levels. Also, its stock price has plunged almost 75% since the Xstrata acquisition including a 29% decline on Monday. The management is trying to control the widening loss by selling assets and reducing debt. Glencore even went ahead and announced suspension of dividend last month and raised $2.5 billion in funds through a share offering.
For years, the CEO’s brash candor and style had impressed investors and irked competitors. Unfortunately his two big bets, buying Xstrata and taking Glencore public have soured, with almost 83% of the company’s total market cap wiped out since the IPO in 2011.
Now the CEO Mr. Glasenberg has been traveling around the world visiting banks, mines and trading offices, to collect information and reassure employees, bankers and investors. He has expressed that markets have overreacted to the existing economic scenario and the panic remains a side effect of being a listed public company. However, he has accounted the risks of carrying increased debt and acquiring mines at a time of declining commodity prices. A couple of days ago, Glencore assured that the business remains financially and operationally robust.
Glencore International PLC, St. Helier (OTCMKTS:GLNCY) shows a scary picture when seen from the larger perspective. The stock ended the last trading session with a loss of 2.54%, not a mojor loss compared to previous sessions but the volume remained high at 3.2 million against the daily average of 1.3 million. The major bear market the stock has been for the last few years is clearly visible from the chart attached and the green weekly candle visible now can’t be any real hope for the bulls this soon. The capitulation phase is going on and until that dumping phase is finished, the downside risk remains open.