If you haven't yet heard of Glencore, you will – and you certainly should, if only because your pension fund is likely to buy into the company soon
If you haven't yet heard of Glencore, you will – and you certainly should, if only because your pension fund is likely to buy into the company soon. The market value of the privately owned Swiss-based mining and commodities trading group, which is about to float up to 20% of its equity for the first time on the London Stock Exchange, may end up equivalent to something not far short of the whole GDP of Libya, at upwards of $70bn. This is a colossal event, and not just for the stock market. A company of this size cannot help but be a major market player, especially since Glencore has just revealed that it is the world's largest commodities trader, controlling 60% of the zinc market, 50% of the trade in copper, 45% of lead and a third of traded aluminium and thermal coal. Oh, and 3% of the world's oil and 9% of its grain too.
With China's insatiable demand for raw materials apparently ensuring that world commodity prices will remain high for a while to come, it is no surprise that Glencore will now generate the biggest ever flotation on the London market or that it is shortly likely to be the first listed company for 25 years to be catapulted straight into the FTSE 100. But its arrival will further increase the exposure to oil, gas and mining shares in the FTSE, which is fine while world trade routes stay open and as long as Glencore's mining investments in places like Colombia and Kazakhstan steer clear of the kind of environmental and political implosions that almost holed BP below the water line in the Gulf of Mexico a year ago. Still, with the former BP chief Tony Hayward now on the Glencore board, how could that happen?
The Glencore flotation also matters because of the sheer scale of the individual rewards that it will bring for those at the top of the company. Glencore's 485 existing employee shareholders are set to coin $100m each from the listing, of whom 65 elite commodity traders are in line for personal windfalls of more than $500m. Chief executive Ivan Glasenberg will sit at the top of this money mountain with a stake worth a cool $9bn. And you thought bankers had it good.
Glencore has come a long way since its early days under the fugitive oil trader Marc Rich. Nevertheless, its move into the market limelight from the secretive environment of Swiss company law marks a major change of regulatory and transparency obligation. Inevitably, banks, accountants and lawyers are falling over themselves to get a slice of the Glencore action – a slice worth around $275m. Pension funds and index trackers will follow. The public's money will soon be exposed. The Glencore flotation is a massive event. It affects everyone. At the very least, all those involved must do their due diligence inquiries and look before they leap.