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Glencore's headquarters in Baar, Switzerland. (SEBASTIAN DERUNGS/AFP/Getty Images)
Glencore's headquarters in Baar, Switzerland. (SEBASTIAN DERUNGS/AFP/Getty Images)

Glencore IPO raises questions Add to ...

The upcoming initial public offering of Glencore International AG has raised several questions since the IPO was first announced in April. Now, with the company valued at about $61-billion amid a volatile commodities market, those questions are growing a little more urgent.

Glencore is an international commodities trader, whose IPO would vaunt it to the top ranks of publicly traded commodity companies. However, some observers have wondered if the timing of the move will define the top of the commodities market, much like Blackstone Group LP's IPO in 2007 defined the top of the private-equity market. Blackstone's share price jumped to $35 soon after trading began in 2007, but the shares have since fallen 48 per cent with the onslaught of the 2008 financial crisis and recession.

Glencore's move comes at an interesting time for commodities. Prices for precious and base metals have surged with the economic recovery and ongoing demand from emerging countries like China. While this demand picture looks strong in the longer-term, concerns about rising interest rates have sent commodity prices reeling this week: Gold has fallen 3.2 per cent, crude oil has fallen 4.4 per cent and silver has plunged about 19 per cent.

The value of Glencore might be reflecting some of this volatility. The company's implied value of $61-billion is down from a higher implied value earlier into the process. Then again, according to the Wall Street Journal, this lower valuation is all part of the grand plan: The Journal said that people close to chief executive Ivan Glasenberg have said that he wanted a lower valuation to ensure that Glencore's shares rise after listing.

In other words, Mr. Glasenberg wants to leave money on the table. He can certainly afford to do this. FT Alphaville has digested the company's prospectus to find out what key Glencore executives stand to make from the IPO. Mr. Glasenberg's stake in the company could be worth as much as $9.6-billion. At least four other executives will be serious billionaires.

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