After a major slump on Monday that cut its share price by a shocking 29%, Glencore’s top brass made a public display of confidence in the giant mining firm, and the share price exploded back upwards.
Tony Hayward, the company’s chairman, just bought 100,000 shares priced at £0.91 each. That’s according to a regulatory filing just out.
Glencore’s shares have been extraordinarily volatile this week. It’s all the more astonishing because both the crash and recovery have been prompted by almost no news or additional information. The swing looks like insanity on the part of the markets — none of the fundamental data on the company has changed in any way. (In fact, copper prices — on which Glencore is dependent — sunk to under $US5,000 per metric tonne during the period.)
On Monday, a note published by Investec suggested that the company’s value could dwindle to basically zero if commodity prices didn’t pick up. But the plunge didn’t occur immediately after the release. It was a slow-burner, dwindling lower and lower through the day. A note from Goldmn Sachs then said Glencore might lose its BBB credit rating, and that crushed the stock, driving it under £1.00.
But GLEN.LN came surging back today: It closed up 14.08%, after a double-digit climb yesterday. Much of Monday’s crash has now been reversed, to the extent that Anglo American, another miner, has now performed worse over the week as a whole.
Though the Bloomberg Commodities index has picked up a little this week, it’s still below where it was at the end of last week, and there certainly hasn’t been enough of a move to explain the recovery.
Here’s how Glencore looks:
The plunge, which cut the share price to below £0.70, made it look like the company was genuinely circling the drain. This is not a small-cap minnow — it’s an enormous mining company with hundreds of billions of dollars in equity.
Anglo American was also named as a company that could be killed off by a toxic combination of low commodity prices and debt in the Investec note, but only fell by about 10% on Monday.
And here’s how it looks for the week:
Hayward actually could have made a lot more money: Glencore’s stock is now back over £0.90, but on Monday it dived to below £0.70 — anyone who picked the bottom correctly has done pretty well for themselves.
And here is the price of copper over the last month: