• Shares closed at 525p against the offer price of 530p
• Glencore has raised $10bn from its initial public offering
Shortsellers rounded on Glencore on the first day of official trading of shares in the mining and commodities trading group, casting a shadow over its blockbuster £37bn listing on the London stock exchange.
The company with a secretive past, founded by former fugitive from US justice, Marc Rich, saw its shares close at 525p against an offer price of 530p.
Although the stock rose 2% on the day, market watchers said the rise was muted as shortsellers sought out the shares to make a killing in the hope they would fall further.
Shorting is done by borrowing the shares from a third party such as a bank, selling them on, and then buying them back when the price, hopefully, plummets.
"There is evidence that hedge funds are borrowing the shares from their prime brokers in the belief they can turn a fat profit some way down the line," said one analyst.
Some shortsellers were buying options on the shares in the derivatives market, betting on continuing falls in the stock price in the weeks ahead.
Glencore's float, although over-subscribed, has been knocked by a sell off in the commodities market in the run up to its flotation. But Glencore has raised $10bn from its initial public offering (IPO).
Sources close to the company said last week it had left "money on the table" with an offer price pitched in the middle of the expected range following advice from its financial advisers, Citigroup and Morgan Stanley.
That was interpreted as the company hoping the shares would close at a 5% to 10% premium to the offer price after the first day of trading, but those hopes have been dashed.
The shares dropped on the grey market after the offer was launched conditionally last Thursday, touching lows of 506p when the mining sector was battered by worries over Chinese demand and threats to a European recovery.
While some analysts expressed concern over Glencore's valuation, several brushed aside worries about the stock trading below the offer price. Analysts at Numis Securities said the listing showed "confidence in a robust long term commodities story."
Tom Gidley-Kitchin at Charles Stanley said: "In an ideal world, they [Glencore] would probably have liked to see the shares being up after the first day of unconditional trading. But being down a couple of per cent is hardly a disaster. The longer term outlook is what really matters."
But Andrei Kroupnik at Collins Stewart said the interesting bit will come when the company releases its earnings, because their growth forecasts for this year were "very aggressive" for the mining division
Swiss-based Glencore, famous for its fiercely guarded tradition of secrecy, has now drawn the line under four decades as a private company. Though largely unknown by the public before the market offering, millions of Britons will become shareholders via their pension funds, as FTSE 100 tracker funds are obliged to own the stock of such a large company. The shares have been catapulted straight into the index of leading shares.
Glencore has consistently said it is listing for the long term and its partners, along with cornerstone investors who have signed up to back Glencore's float, are locked in for at least six months.
But price still matters for Glencore if it is to use the stock as currency for more of the opportunistic acquisitions that have made its fortunes – not least a long-expected move on miner Xstrata, in which it owns a 34% stake.
The market for share offerings has been unpredictable, with at least ten European initial public offerings in the last three months being pulled at the last minute. All London IPOs so far this year are trading under water, or below their offer price.
Founded in 1974 by Marc Rich, a trading sensation who fell foul of US authorities, but who was controversially pardoned by President Clinton on his last day in office in 2000, Glencore has grown into the world's largest diversified commodities trader, with subsidiaries employing tens of thousands of staff.