Commodities trader Glencore's shares were stuck under water on their first day of official trade, dashing hopes of a strong start after it set a mid-range flotation price for London's largest ever offering.
Sources close to the matter had said Glencore, the world's largest diversified commodities trader, felt it had left money on the table with an offer price of 530 pence that valued the company at 36.7 billion pounds ($59.15 billion).
The shares, however, dropped on the grey market after the offer price was set on Thursday, touching lows of 506 pence on Monday, when miners were battered by worries over Chinese demand and threats to a European recovery.
By 5 a.m. EDT on Tuesday, the first day of unconditional trading, the shares were changing hands at 526 pence, up 2.3 percent, outperforming a 1.6 percent rise in the mining sector where stocks were recovering after Monday's sharp falls.
The shares begin trading in Hong Kong on Wednesday.
While some analysts still expressed concern over Glencore's valuation, several analysts and bankers brushed aside worries about the stock trading below the offer price. They said the market debut should be seen as a success given its size and continued uncertainty in both commodity and equity markets.
Analysts at Numis in London said the listing showed confidence in a robust long term commodity story.
It has performed in line with the market. The interesting bit will come when they release their earnings, because their growth forecasts for this year were very aggressive for the mining division, analyst Andrei Kroupnik at Collins Stewart said. Glencore is due to publish its results for the first quarter of the year by the end of next month.
Ultimately, it has only been a few days. Markets are volatile and commodities are still mostly going down.
Analysts said other potential catalysts for the stock include the planned acquisition of an additional stake in miner Kazzinc, which it already controls, an update on the potential listing of Kazzinc's gold business, an upgrade to its credit ratings and any acquisitions.
DONE AND DUSTED
It is good to get it done and dusted. Obviously we would much rather it was trading above issue price, said one source close to the deal. Markets don't feel fantastic at the moment.
Swiss-based Glencore, famous for its fiercely guarded tradition of discretion, draws the line on Tuesday under almost four decades of life as a private company, with what is set to be London's largest initial public offering to date.
Though largely unknown by the public before the market offering, millions of Britons are likely to become shareholders via their pension funds, as tracker funds buy up the stock.
Glencore will join the FTSE blue chip index on Wednesday, further boosting a basic resources sector that already makes up around 15 percent of the index, making it the second largest behind oil and gas. Glencore will add 0.28 percent to that, though its weighting will increase along with its free float.
Glencore has consistently said it is listing for the long term and its partners, along with cornerstone investors who have signed up to back Glencore's float, are locked in for at least six months.
But price still matters for Glencore if it is to use the stock as currency for more of the opportunistic acquisitions that have made its fortunes -- not least a long-expected move on miner Xstrata in which it already owns a controlling stake of over a third.
The market for share offerings has been unpredictable, with at least ten European initial public offerings in the last three months being pulled at the last minute. All London IPOs so far this year are trading under water, or below their offer price.
Founded in 1974 by Marc Rich, a trading sensation who fell foul of U.S. authorities, Glencore has grown into the world's largest diversified commodities trade, with subsidiaries employing tens of thousands and an oil division with more ships than Britain's Royal Navy.
(Additional reporting by Kylie MacLellan; Editing by Mark Potter and Alexander Smith)