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Sunday, May 15, 2011

The Glencore IPO

Swiss-based commodity trading company Glencore is set to reveal the pricing of its IPO this week for the dual markets of London and Hong Kong. Glencore’s IPO will be one of the largest ever, with an estimated value of $12 billion dollars.

What makes Glencore fascinating is what the company is, and how it came about.

Glencore was founded as “Marc Rich and Company” in 1974. As described by Vanity Fair magazine in 2001, Marc Rich is "defined by his money, the kind of wealth that moves governments and transcends borders.”

Marcell David Reich obtained his wealth through being a highly skilled commodities trader, unrestricted by moral or ethical boundaries. That is, he got rich by what most people would consider immoral and/or criminal behavior.

Marc Rich is an avowed fan of writer Ayn Rand, a Russian-born American whose primary philosophical ideas are that greed and selfishness are good (called “rational self-interest”); that a person can decide for himself what is moral and what isn’t (no one can tell you what to do); and, that weak people do not deserve to be loved. For obvious reasons, Ayn Rand’s philosophies are favorites for those with narcissistic and borderline personality disorders.

Rich is known for doing business with dictators and zealots throughout the world, and in fact admits as much (his theory is that if he didn’t deal with them, someone else would). Most famously, he traded oil with Iran during the Iranian hostage crisis, thereby disobeying the US embargo. He later admitted that it was his most profitable business transaction ever.

As a result of this action and others, Rich soon found himself on America’s “most wanted” list. He renounced his American citizenship, and has since held Bolivian, Spanish and Israeli citizenships.

When Marc’s daughter Gabrielle contracted leukemia in 1996, he was reportedly distraught at not being able to visit her in the US. When she died at age 27, he pleaded with the US government to be allowed to attend the funeral, but was denied.

Powerful people – including Rich’s ex-wife Denise - lobbied the Clinton administration and eventually had Rich pardoned for his crimes (on Clinton’s last day in office), but Rich has nonetheless never stepped foot in the US since. He believes that although he has received an official pardon, if he were to actually go back to the US he would be arrested on some new charge.

In 1994, Rich was forced out of his own company - for endangering the firm through risky trades - and sold his stake in the company now known as Glencore.

Still working as a commodities trader, Rich now spends most of his time in Switzerland. He enjoys skiing at St. Moritz, collecting impressionist art, and drinking champagne. According to biographer Daniel Ammann, he still cries whenever his departed daughter’s name is mentioned. Like many in his situation, Rich is also active in charity work.

Glencore’s official “history of the company” website doesn’t even mention Rich’s name; it is apparently a connection they would rather forget.

On a personal note, I owe a great deal to Marc Rich. When I first read about Marc Rich and his ideas, I was so appalled that it served partly as the inspiration for the “Morality and Ethics” section of my book, The Intelligent Investor’s Mind.


“Justice is unrelenting. Creative individuals and undeviating purpose and rationality achieve joy and fulfillment. Parasites who persistently avoid either purpose or reason perish as they should.”

Alan Greenspan, defending the philosophy of Ayn Rand in a 1957 letter to the New York Times.


Ayn Rand - first of a two-part interview with Mike Wallace, 1959