A sorely needed IPO success story

London’s float market badly needed a success story after a run of false starts and postponements this year. And Glencore’s moderate price movement during its first day’s trading seems to have supplied just that.

Observers looking for a superstar rally, to fit hype from bankers last week that a five to 10 per cent rise was expected on day one, were understandably disappointed. But as one analyst put it: “It’s a miner, not a tech company.”

Of course, Glencore is not a pure miner and in fact derives the lion’s share of its revenues from commodity trading, where it has close to a 50 per cent market share in a range of commodities. The company’s trading arm uses its global scale to take advantage of price differences faster than rivals, shipping materials across the world in bulk to meet demand.

This makes it more complex than a FTSE 100 miner, as it benefits from commodity price volatility, not just rises. Its trading operation has been criticised for being a “black box” without enough information telling investors how it works. But as Numis Securities’ Andy Davidson said: “The moment we do know exactly how it works, then Glencore will lose its edge.”