Glencore, GLEN, Down 3% On Qatar Stake Sale – What Next?

Trade Glencore Shares Your Capital Is At Risk
Tim Worstall
Updated: 24 Mar 2022

Key points:

Glencore (LON: GLEN) shares are off 3% in London this morning as a result of Qatar’s announcement that it has cut its stake in the company. The sovereign wealth fund formerly owned some 1.22 billion shares and they sold 159 million of those.

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The share sale itself seems sensible enough. Glencore shares are above their peak since flotation back in 2011. So, taking a profit on a ten to fifteen percent share of a holding seems reasonable enough for a wealth fund. Certainly better than selling at lower prices.

This moves Qatar from largest to second-largest shareholder – Ivan Glasenberg the former CEO and really the driving force in the company’s formation moves up to being the largest holder.

The question becomes, well, what do we think this presages for the future price of Glencore shares? That calculation really revolving around whether we think this is just a sensible trimming of a winning stake – or even a rebalancing of a portfolio – or an attempt to sell out at the top.

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It is normal enough that a sovereign wealth fund wants to be balanced. Yes, winning positions should be left to run but it’s still possible to end up with much too much of a portfolio in the one sector or company. So, winning positions do get trimmed in order to rebalance. We might think that is what has happened here. The Glencore share price has more than doubled in only a couple of years after all.

If it were an attempt to sell out at the top then we might assume that rather more of the stake would have been placed upon the market. This is, at that 10 to 15%, a trimming of the Glencore stake, not a selling out of it.

We also have other evidence. For the past few days, Glencore itself has been buying in shares. For example:

GLENCORE PLC (“Glencore”) announces today that it has purchased the following number of its ordinary shares…….407,249

Entirely true that half a million Glencore shares is not quite the same thing as the 159 million sold. But Glencore has been buying in shares at these prices several times in the past week or so. Four or five lots, most at this around half a million size deal. This tells us something about what the Glencore management thinks the share price is like – not the peak, not the top of the market at all. For companies – sensible companies that is – do not buy in their own shares when they’re expensive, but when they’re cheap.

It’s thus possible to take either view of the future of Glencore’s share price. Management of the company thinks it’s still got room to grow. Qatar might think it’s the peak, or maybe they’re just trimming and rebalancing. Of such differences of opinion are markets made.

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