Shares in Glencore bounced higher following yesterday’s fall
This morning, shares in Glencore [JSE:GLN]
climbed back over 5% in earlier trading following the steep plunge in its shares in the UK and SA yesterday.
Shares in Glencore are down 73.61% “since listing in November” on the JSE, notes MoneyWeb
. Just this month, shares are down “over 40%”.
Analysts believe the company could encounter “severe problems” if it doesn’t reduce its debt and the prices of commodities “don’t recover,” reports the BBC
. Analysts at Citigroup said the selloff in the commodity group in “overdone”.
The majority of commodity-based businesses have suffered thanks to commodity prices trading at “multi-year lows,” says Fin24
. But Glencore is paying the price due to “its huge $30 billion debt load”.
What’s behind Glencore’s woes?
There are three main factors pulling Glencore down, explains IOL
Very low commodity prices;
Very high levels of debt; and
Weak growth in China.
JC Louw, the chief investment officer at Contego, told MoneyWeb
that Glencore’s “downside risk is still high”. Worrying is the “potential downgrade of its debt by rating agencies”.
Analysts at Investec said that “without major restructuring,” the company is in trouble, adds the BBC
This followed Investec’s research note that said it questions “how much value will be left for equity holders if commodity prices do not improve,” says Fin24
At time of writing, shares in Glencore were trading 3.83% higher at R16.
So Glencore could face severe strife ahead, particularly if rating agencies downgrade its debt. The company will be hoping for a swift recovery in commodity prices.
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