Glencore being investigated by US commodities regulator

Glencore shares fell on Friday after it announced that it is being investigated by the US Commodity Futures Trading Commission (CFTC) over possible corrupt practices that may have led to the violation of some regulations.

"Glencore understands that the CFTC's investigations are at an early stage and have a similar scope in terms of subject matter as the current ongoing investigation by the US Department of Justice," it said in a statement after the close on Thursday.

The Swiss commodity trader and miner said it will cooperate with the US commodities regulator and its response will be managed by its Investigations Committee, which was set up in July 2018 to oversee the company's response to the investigation by the DoJ.

RBC Capital Markets said: "Without having any special insight on the DoJ investigation, or now the CFTC investigation, the potential impact on Glencore shares remains uncertain as the company works towards a settlement. A link between this investigation and the CFTC investigation, based on recent comments from the Director of Enforcement James McDonald, suggest that this is likely an extension of the current DOJ investigation on Glencore’s adherence to the US Foreign Corrupt Practices Act. There is no known timeline for completion.

"This will not help the recently recovering sentiment from investors around Glencore shares but we are not sure that this extension, other than potentially expanded scope, really changes anything. We believe that GLEN, trading at an average 4.5x 2019-20e EV/EBITDA, continues to price a significant discount to Rio Tinto and BHP on 7.7x, in a large part owing to the current investigation.

"We continue to see good long-term value in GLEN shares but weaker coal markets and the lingering impact from the investigation are unlikely to allow for a re-rating in the near-term."

At 0935 BST, the shares were down 3% at 311.85p.