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Glencore recoups most of Monday's 29% plunge
[LONDON] Glencore Plc recouped most of its losses from Monday's 29 per cent plunge as the shares rallied for a second day, with investors spying a bargain and metals prices rising.
The company jumped 11 per cent to 88.83 pence by 1.34 pm, just 8 pence below the close last Friday before a swoon this week that some termed Glencore's own "flash crash." The excessive slump left the stock undervalued, JPMorgan Chase & Co said on Wednesday.
The mining and trading company sought to reassure investors on Tuesday, saying it had "absolutely no solvency issues" and secure access to funding. It's also seeking to raise more than US$1 billion by selling future production of gold and silver to stave off criticism over its debt load, according to two people familiar with the situation.
"The market got scared," said John Meyer, a mining analyst at broker SP Angel Corporate Finance LLP in London. "It was Glencore's flash crash, based on momentum rather than reality. I think Glencore's stock will continue to climb." While the company's collapse on Monday may bear some analogy with the trading frenzy in US stocks in May 2010 that became known as the flash crash, Glencore had already lost more than two-thirds of its value this year as prices for the commodities it produces tumbled.
To counter the declining prices, Chief Executive Officer Glasenberg is working on a debt-cutting plan including a sale of assets, halting its dividend and a $2.5 billion share sale completed this month. Glencore hired Citigroup Inc and Credit Suisse Group AG to sell a minority stake in its agricultural business, a person familiar with the matter said on Friday.
More capital may be needed to eliminate credit risks, JPMorgan said Wednesday in a report. Citigroup also wrote that management should consider taking the company private.
Investors including Legal & General Group Plc had pushed the firm to break its silence on the crash, saying the company faced a "quasi-Lehman moment," where rumors about its viability hurt the stock amid a lack of information from its leadership.
The company said in its statement Tuesday that it had good liquidity, no debt covenants, and strong credit lines.