LONDON, Sept 23 (Reuters) – Unprecedented shareholder pressure over the past six months at listed commodities firms Noble and Glencore have taught their private rivals an unforgettable lesson – think twice before going public or amassing large physical assets.
Noble’s stock is trading near its lowest since the 2008 global financial crisis and Glencore’s touched an all-time low on Tuesday due to plunging commodities prices and earnings.
“In the last two years you were possibly better off being private and not being listed, with the short sellers being so active in commodity companies,” said Karel Valken, global head of trade and commodity finance at Dutch bank Rabobank.
After the record $10 billion Glencore share offering in 2011, which turned its managers into billionaire shareholders, commodity traders had come under an unprecedented spotlight.
Even though most unlisted merchants kept insisting they saw the private model as the most appropriate for now, many market watchers said it was only a matter of time before the likes of Louis Dreyfus followed suit to raise money for expansion via listings.
Those views first began to change after Olam International hit the headlines in late 2012 when its accounting practices were under attack from short seller Muddy Waters.
Then in February this year Noble came under fire when blogger Iceberg Research alleged that the company was inflating its assets to the tune of billions of dollars by not fairly representing the value of its commodity contracts – claims that a private firm would never have to deal with.
Noble rejected the allegations and a report by board-appointed auditor PricewaterhouseCoopers (PwC) found no wrongdoing in the company’s accounting practices.
In the case of Glencore, the recent slide in its share price was triggered by a slump in earnings, which was compounded by a downward revision in its outlook to negative by ratings agency Standard & Poor’s, along with an increasingly shaky economic outlook for top commodities consumer China.
This month, the mighty chief of Glencore, Ivan Glasenberg, had to bow to shareholder pressure and agree to cut debt as worries mounted over the firm’s ability to protect its rating amid tanking commodity prices.
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