CONDITIONAL trading kicks off in the biggest float in London’s history this morning, with newly issued shares of commodity giant Glencore expected to open at a price of 530p.
That would be precisely in the middle of the 480-580p price range it set before its investor roadshow. The price values the company at $60.1bn or £36.5bn after new money raised by the float.
But traders expect the shares to close up, around 550p, which would herald a rare success for London’s initial public offering (IPO) market this year. So far, 2011 has seen billions of pounds worth of deals pulled due to high market volatility, including Edwards, Skrill, Euroset and Russian Helicopters.
Glencore stock will today only be traded by those with allocated shares and those who already own equity in the company, with full public trading to begin next Tuesday in London and Wednesday in Hong Kong.
The float, which could eventually comprise 20 per cent of Glencore’s total value, will see 2.5 per cent of its publicly traded shares listed in Hong Kong, versus ten per cent in London.
Public trading should see the share price jump further as index tracking funds snap up what BGC Partners’ David Buik estimates will be 105m shares when Glencore is pushed straight into the FTSE?100.
The high demand for shares in the commodities trader comes despite a warning by Morningstar analysts yesterday that “Glencore’s marketing operations remain a black box” despite its 1,600-page float prospectus. Morningstar said that it is still not clear whether Glencore makes more money from arbitrage trading or speculative bets on prices.