03 July 2018 by lberuti
This morning GLENLN (Glencore Plc) announced that it received a subpoena from the US Department of Justice yesterday regarding potential money-laundering allegations. US authorities have requested that the Swiss miner produce documents with respect to compliance with the Foreign Corrupt Practices Act and related to the group’s business in Nigeria, the Democratic Republic of Congo (DRC) and Venezuela from 2007 to date. When charged by US authorities, companies generally agree to settle the charges by paying an amount close to the estimated profits resulting from the bribes (disgorgement), and a criminal penalty close to the disgorgement amount. Even if circumstances and facts are different in this case, one of the largest DoJ fines for Money Laundering came in 2012 for HSBC and was worth $1.9bn. At the close of business today, investors had sent GLENLN’s stock 8% down, wiping out $5.4Bln of the company’s market capitalisation. They also pushed its 5-year risk premium 24bps wider at 208bps. One could argue that until we get further details, most of the damage is probably done, but with more and more people focusing on environmental, social and governance (ESG) factors as considerations in their investment analysis, one should expect more volatility over the next few days.