Shares in Glencore International Plc fell as much as 3 percent on their Hong Kong debut on Wednesday, with Asian investors spooked by concerns over valuations and the outlook for commodities.
The listing, a day after Glencore made a lackluster start in London, puts an end to the drawn-out process of taking the 37-year old commodities trader public at a time when prices for copper, oil and other raw materials have been falling sharply.
Glencore CEO Ivan Glasenberg — an intense and ambitious former coal trader — sounded bullish on the outlook for commodities and blamed the first day performance on general weakness in stock markets around the world.
"Commodity prices have decreased considerably the past few weeks," Glasenberg told reporters after the listing ceremony at the downtown offices of Hong Kong Exchanges and Clearing Ltd.
"As you know all markets around the world have decreased in price. I think we're just following the rest of the markets," said Glasenberg, whose 15.8 percent stake is worth more than $9 billion on paper.
Hong Kong IPOs generally attract a lot of interest from retail investors, but Glencore's offer wasn't particularly hot among them. The IPO received bids worth just 3.92 times the shares on offer for retail investors, compared with more than 2,000 times over subscription for the IPO of handbag retailer Milan Station .
"The market's perception is that it is run by 60 or so commodities traders and they make heavy bets in this market," said Francis Lun, assistant CEO of Lycean Holdings Ltd.
Glencore shares traded as low as HK$64.55 and closed at HK$64.85 versus an offer price of HK$66.53. The benchmark Hong Kong share index ended flat, having fallen about 2 percent since Glencore's final offer price was set late on May 18.
Last week, Glencore raised $10 billion through a London and Hong Kong initial public offering, giving the Swiss commodities trader firepower for acquisitions. The disappointing debut once again brought to question whether the commodities super cycle is nearing its peak.
Glencore's management and bankers set the price of its IPO in the middle of an indicative price range, leaving "money on the table" to boost the stock in the first few days of official trading, but many investors expressed concern over the company's valuation given the uncertain outlook for commodity prices, particularly after this month's sell-off.
"The bull market in the commodities ran out of steam. And people are very afraid that if the commodities bubble bursts, Glencore will not be able to make this kind of money," Lun added.
Glencore's London-listed shares were stuck under water on their Tuesday debut, dashing hopes of a strong start after it set a mid-range flotation price for London's largest-ever offering.
The London shares were down 1.3 percent in early trade on Wednesday.
Glasenberg, who flew straight after the London listing ceremony to attend the Hong Kong event, handed a miniature metal truck to the Hong Kong stock exchange as a memento. In return, he received a crystal bull.
"Retail investors are not too enthusiastic about Glencore as they have been more focused on penny stocks with small market capitalisations recently," said Joseph Fong, an associate with Ping An China Securities.
"Glencore is too big for retail investors to have big profit on day one," added Fong, who owns less than 1,000 shares in Glencore.
At around HK$65 a share and a minimum trading lot of 100 shares, investors have to spend nearly 30 times more to buy Glencore than to trade Milan Station, for example.
Founded in 1974 by Marc Rich, a trading sensation who fell afoul of U.S. authorities, Glencore has grown into the world's largest diversified commodities trader, with subsidiaries employing tens of thousands and an oil division with more ships than Britain's Royal Navy. It owns 34.5 percent of London-listed miner Xstrata.
Commodities price volatility in recent weeks fuelled worries over the IPO, but Glasenberg has played down the impact on the listing, saying decline in commodities was due to some froth leaving markets.
Citigroup, Credit Suisse and Morgan Stanley are the joint global coordinators for the offer. In all, 23 banks were involved in the IPO, with a potential fee pool of $275 million.
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