Glencore: The Secret Commodity Empire Goes Public

For decades, the world’s largest commodity trading company operated in near-total secrecy. No public filings. No shareholders to answer to. No journalists poking around. Then on May 19, 2011, Glencore listed on the London Stock Exchange and raised $12 billion in one of the biggest IPOs in history. Chapter 38 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how a fugitive’s private empire became a public company. And how the insiders who sold their shares at the top never saw that price again.

The Fugitive Who Built It

The story of Glencore starts with a man named Marc Rich. Born Marcell David Reich on December 18, 1934, in Antwerp, Belgium. His parents were German-speaking Jews who saw what was coming in Europe and got their family out. They fled to the United States.

Rich started in the commodity business in 1954 at a firm called Philipp Brothers, one of the biggest commodity trading houses of that era. He was good at it. Very good. But after 20 years there, he wanted to run his own show.

On April 3, 1974, Rich left Philipp Brothers together with Pincus Green, Jacques Hachuel, Alexander Hackel, and John Trafford. They set up shop in Zug, Switzerland, and called the company Marc Rich + Co AG.

Why Switzerland? Because Switzerland minds its own business. And Marc Rich was about to need a country that minds its own business.

Breaking the Oil Cartel

At the time, the global oil market was controlled by a group known as the Seven Sisters. These were the biggest Western oil companies, and they basically decided who bought oil from whom and at what price. It was a cartel in everything but name.

Rich and Green saw an opening. They started buying oil directly from producing countries, cutting out the Seven Sisters entirely. This was bold. It was also extremely profitable. Producing countries wanted better prices than the Sisters were paying. Rich gave them those prices and took a cut in the middle.

By the early 1980s, Marc Rich + Co was the largest independent oil trader in the world. The company was generating more profit than UBS, which was the biggest bank in Switzerland. Rich’s personal wealth was estimated at over $1 billion.

The Client List From Hell

Here is where the story gets uncomfortable. Rich and Green would trade with anyone. And by anyone, I mean anyone.

They traded with Iran during the American hostage crisis. With Castro’s Cuba. With Milosevic’s Yugoslavia. With North Korea. With Gaddafi’s Libya. With Brezhnev’s Soviet Union. With apartheid South Africa. With Nigeria and Angola. Basically, if a country had commodities to sell and nobody else would deal with them, Rich was happy to step in.

The US Justice Department was not amused. They accused Rich of organized crime and tax fraud. Rather than face the charges, Rich stayed in Switzerland. He and Green ran their global empire from Zug while being fugitives from American justice. For twenty years.

Think about that for a second. Two men on the run from the US government, and they are casually running the biggest commodity trading operation on the planet from a small Swiss town. Because in the commodity world, nobody cares about your legal status as long as you can deliver the goods.

The Buyout in the Parkhotel

By the early 1990s, Rich was getting older and the company needed to evolve. In November 1993, 39 key employees met at the Parkhotel in Zug. Led by a man named Willy Strothotte, they organized a management buyout.

Rich sold his shares to about 200 employees. The company was renamed Glencore, which stood for Global Energy Commodity Resources. Same business. Same address. Same secrecy. But now it was owned by the people who ran it.

This is an unusual setup. No outside investors. No public shareholders. Just the managers and employees owning everything. And they liked it that way. When you are trading with every controversial government on Earth, the last thing you want is public scrutiny.

The Presidential Pardon

The Marc Rich story has one more twist. On January 20, 2001, his last day in office, President Bill Clinton granted full and unconditional pardons to both Marc Rich and Pincus Green.

This was controversial, to put it mildly. It remains one of the most debated presidential pardons in American history. Rich had been a fugitive for nearly two decades. He had traded with countries under US sanctions. And on Clinton’s way out the door, all of that got erased.

Rich never went back to the commodity business in a big way. He died on June 26, 2013, at the age of 78, from a stroke in Lucerne. But the machine he built kept running.

The Giant That Stayed Hidden

By the time of the IPO, Glencore was a monster. It traded aluminum, copper, zinc, nickel, lead, iron ore, coal, crude oil, and agricultural products. It owned 33% of Xstrata, a major mining company. It was the largest company in Switzerland by sales.

And almost nobody outside the commodity world knew its name.

Glencore was completely owned by management and employees. They cherished secrecy above all else. No quarterly earnings calls. No analysts picking apart your strategy. No activist investors telling you what to do. Just trade, make money, and keep your mouth shut.

It sounds like a great setup. But there was a problem. The employees who owned the company wanted to cash out. Their wealth was locked up in shares of a private company. You cannot buy a house with Glencore equity if nobody can trade Glencore equity. The only way to turn paper wealth into real money was to go public.

May 19, 2011

Glencore listed on the London Stock Exchange at 5.30 GBP per share. The IPO raised approximately $12 billion. It was one of the largest IPOs London had ever seen.

The CEO was Ivan Glasenberg. He had been with the company since 1984 and running it since 2002. After the IPO, his stake was estimated at around $5 billion. That put him in the top 10 richest people in Switzerland.

In February 2012, Glencore announced a merger with Xstrata, the mining company in which it already held a 33% stake. The deal closed about a year later. Now Glencore was not just a trading house. It was a trading house plus a massive mining operation. One of the biggest commodity companies on the planet.

Management had timed the IPO to perfection. Or rather, they timed it perfectly for themselves.

The Price That Never Came Back

Here is the part the insiders probably do not talk about at dinner parties.

The IPO price of 5.30 GBP turned out to be the high-water mark. The stock never got back there. Not once.

Commodity prices had been on a long run up, fueled by Chinese demand and cheap money after the 2008 financial crisis. By 2011, that super-cycle was peaking. Glencore’s management, who understood commodity markets better than almost anyone alive, chose that exact moment to sell shares to the public.

Was that intentional? Dennin does not say it outright. But the timing speaks for itself. The people who spent their careers reading commodity cycles cashed out right at the top.

By September 28, 2015, Glencore shares had fallen to 0.67 GBP. That is an 87% drop from the IPO price. If you bought shares on IPO day and held them for four years, you lost almost nine out of every ten pounds you invested.

By January 2019, the stock had recovered to about 3 GBP. Better, but still roughly 40% below where it started.

The insiders who sold at the IPO got rich. The public investors who bought from them got crushed.

What Stays With Me

A few things about this chapter stand out.

First, the sheer audacity of Marc Rich’s career. The man traded with every sanctioned, embargoed, and internationally condemned government on the planet. He was a fugitive from US justice for two decades. And during that entire time, he was running the biggest commodity trading company in the world from a small Swiss city. There is no other industry where that is possible. Commodities do not care about your reputation. They only care about your reliability.

Second, the management buyout. Two hundred employees buying out a fugitive billionaire in a hotel in Zug. That is how the world’s largest commodity house changed hands. No investment bankers. No bidding wars. Just a bunch of traders deciding to take over their own company. And then running it in total secrecy for nearly twenty years.

Third, the IPO timing. Glencore’s managers were commodity traders. That was their entire job. Reading supply and demand, spotting peaks and troughs, knowing when to buy and when to sell. They chose to sell their own shares in May 2011. The stock lost 87% in the next four years. These were not dumb people making a mistake. They were the smartest commodity traders in the world, and they sold at the top.

There is a lesson somewhere in there. When the people who know a business best are selling, you should probably not be buying. Glencore’s IPO made its employees rich and its public shareholders poor. The most secretive company in the commodity world went public exactly when it suited the insiders to go public. And then the price collapsed.

Marc Rich built the company by being willing to deal with anyone. His successors kept the same spirit. They just expanded the definition of “anyone” to include public market investors who did not know what they were buying into.

Based on Chapter 38 of “From Tulips to Bitcoins” by Torsten Dennin (ISBN: 978-1-63299-227-7, River Grove Books, 2019).

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