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Glencore share price falters amid bribery scandal

The Glencore [GLEN.L] share price has slipped over the past few weeks as the most-traded miner on the UK stock market finds itself once more embroiled in a huge bribery scandal, with prosecutors now considering charges against senior individuals.

Following its public listing in May 2011 — the City’s largest ever — and subsequent takeover of rival Xstrata, Glencore became one of the largest stocks on the FTSE 100 index. However, this is a success story tainted in a string of bribery scandals among some of its top executives.

While mining stocks are generally outperforming in the current market environment, could the scandal have an impact on Glencore stock over the short to medium term, and how concerned should shareholders be?

What’s happening with Glencore’s share price?

Glencore’s share price has been on an upward trajectory over the previous two years, rising an impressive 228.84% from 166.74p on 26 June 2020 to a 52-week high of 548.3p just a few weeks ago on 7 June. Since then, though, the shares have slipped 18.6% amid the latest bribery revelations, falling to 446.25p at the close on Friday 24 June. Year-to-date, Glencore stock is up 21.46%.

Glencore admits to multi-million dollar bribery offences

A long-term investigation by the UK Serious Fraud Office (SFO) culminated in Glencore admitting to seven counts of bribery and paying $28m in kickbacks. Unnamed senior executives were involved in paying corrupt foreign government officials for preferential access to oil cargoes in Nigeria, Cameroon, Côte d’Ivoire, Equatorial Guinea and South Sudan.

Glencore has now pleaded guilty to multiple charges of corruption by both the UK SFO and US Department of Justice, spanning over a decade through to 2018. So far, one former senior trader — UK citizen Anthony Stimler, who worked on Glencore’s west African oil desk — has been charged by US prosecutors. Stimler admitted approving bribes over a seven-year period to help the company buy oil cargoes from the Nigerian government.

Last month, US attorney Damian Williams called the case “staggering”, saying: “Glencore paid bribes to make… hundreds of millions of dollars. And it did so with the approval, and even encouragement, of its top executives”.

The total bill is expected to reach $1.5bn — a significant sum, but dwarfed by the company’s 2021 revenue of $203.7bn. Perhaps in this context, Glencore’s share price dropped only a modest 3.24% last week, as prosecutors now consider charges against former senior executives alleged to have sanctioned the bribes.

Can a new broom minimise the impact on Glencore stock?

The company is keen to draw a line under past corruption and start afresh. New CEO Gary Nagle said last month that “this type of behaviour has no place in Glencore”. Former CEO Ivan Glasenberg, alongside other top executives, have left the company since the US investigation began in 2018. Nagle said that Glencore has “taken significant action towards building and implementing a world-class ethics and compliance programme”. Kalidas Madhavpeddi, approaching his first anniversary as chairman, said “Glencore today is not the company it was”.

This clean slate is certainly a positive signal, as the company doubles down to consign its murky misdemeanours firmly in the past. However, unnamed executives alleged to have sanctioned the bribes may well face charges from UK prosecutors. So, until the UK and US court cases are finally resolved, the stigma is likely to continue to linger.

Glencore stock traded nudged above its 530p offer price for the first time in April since its 2011 listing, after commodity prices soared on Russia’s invasion of Ukraine. Long-term investors will certainly have had to wait a long time for that, but any celebration would have been short-lived — the shares have since fallen by over 100p, or almost 20%..

What are analysts’ views on Glencore’s share price?

Analysts covering the stock remain positive, despite the latest bribery revelations and ongoing investigation. The 17 analysts offering 12-month price targets on Glencore have a median target of 600.13p, representing a potential upside of 34.48% based on last Friday’s close at 446.25p, according to the Financial Times. This bullish outlook is supported by a consensus ‘outperform’ recommendation on Glencore stock among 14 analysts. Four analysts rate Glencore a ‘buy’, while three have a ‘hold’ recommendation.

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