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Investors Question Glencore Pricing

Commodity trader Glencore International hit the road Wednesday to pitch its up to $11 billion initial public offering, waving off criticisms that its valuation came in at a disappointingly low price.

Mahaux Photography | Riser | Getty Images

At a packed luncheon with investors at London’s Stationers’ Hall, chief executive Ivan Glasenberg was asked why Glencore’s valuation didn’t wind up at a level north of $60 billion, as some European analysts had expected.

“I want my investors to have some upside,” Glasenberg told the group, according to attendees, “not go sell my shares…and go live on the beach.”

Glasenberg’s comments countered criticisms that Glencore should have priced higher than its intended $8 to $10 per share as well as longer-term worries that the closely-held company’s partners are essentially calling the top of the commodities market and planning to sell out.

As part of its regulatory filings, Glencore has said it expects to use the expected $7.9 billion in IPO proceeds to grow the company and pay down debt. Some analysts and investors believe those efforts could include the purchase of Xstrata, the mining company (in which Glencore now holds a roughly 35 percent stake).

An additional $2.1 billion or so in secondary sales by partners, today’s documents state, will be used “solely to cover…individual tax liabilities” and pay back “a small tranche of loans.”

Glencore’s filings also disclosed that the company had secured $3.1 billion worth of commitments from a dozen so-called cornerstone investors—a story we broke on “The Strategy Session” last week.

Those investors include sovereign-wealth funds in Singapore and Abu Dhabi, plus long-only investors in the U.S. like Fidelity and Blackrock , and a group of hedge funds that includes Eton Park, Och-Ziff, and York Capital.

Follow Kate on Twitter: @katekellycnbc


Watch Kate Kelly weekdays at Noon ET on CNBC's "The Strategy Session."

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