THERE is still time for it to all go horribly wrong but the signs are very much that the commodities trader Glencore is about to pull off a major triumph with its $11-$12bn flotation.
The process, which began some weeks ago but was foreshadowed by months if not years of speculation, has been played out against a backdrop of a poor IPO market, at least in London where several flotations have recently been pulled and where the majority of the new Glencore shares are being sold.
It also takes place at a time of substantial volatility in the commodities markets, with some expecting a sharp fall in the price of oil and metals in particular over the next few months.
The whole flotation marketing process also got off to a notoriously crass start, with confusion over the choice of a new chairman that led to the two top candidates briefing against each in public and more savagely in private.
Its eventual chairman Simon Murray then managed to insult the corporate governance groups with some rather politically incorrect thoughts about the role of women in business.
The media commentariat thoroughly enjoyed the carping between the nearly man candidate and former BP chief Lord Browne and Murray but Glencore’s management and its advisers simply ignored the background noise and got on with the job of selling; they sold the company’s track record, its future prospects and its executive team.
They also came up with the masterstroke, sure to be followed in future floats of this sort of size, of signing up strategic cornerstone investors who were happy to take up to a third of the new shares on offer and promise not to sell them for up to six months. That’s quite something for funds that are often short-termist in their investment behaviour (and even if they aren’t they generally prefer the choice of staying in or selling out).
As Peter Davey, an analyst at Standard Bank and a sceptic at the beginning of the discussions over the Glencore float, said yesterday: “That gave other investors the feeling of comfort they needed.”
Davey might still not be a convert to all the Glencore hype but he, like the rest of us, can see why it is looking like a flotation success.
The cornerstone investors’ commitment to hang on for six months regardless of external events was followed by up Glencore chief executive Ivan Glasenberg, who vowed not to sell a share while he is with the firm.
Whether his commitment was a prerequisite of the cornerstones’ lock-up agreement is unclear but it would certainly have helped them make their decision.
So we head towards the final hours – pricing is tomorrow – with a price that will be pitched to look reasonable and hence encourage a healthy market.
Yesterday it emerged that the advisers are sharpening the price range, taking it a bit higher at the lower end.
It will be priced to get off to a good start, and it has an order book that is several times oversubscribed.
In the circumstances, that is an incredible achievement and a major boost to London’s reputation for pulling such deals off. Then the arguments will rage about whether this represents the top of the commodities cycle and whether this is the last deal of its kind for the sector.