Glencore stock weakens as U.S. probes 'corrupt practices'

FILE PHOTO: The logo of commodities trader Glencore is pictured in front of the company's headquarters in Baar, Switzerland, July 18, 2017. REUTERS/Arnd Wiegmann

(Reuters) - Glencore Plc shares plunged the most in nearly four months on Friday after news overnight that U.S. regulators were investigating whether the miner broke some rules through “corrupt practices”.

Shares of the FTSE 100 company, which have lagged other mining heavyweights this year, fell as much as 4.2 percent in early trading, and were down 3.6 percent at 309.85 pence by 0807 GMT.

After the markets shut on Thursday, Glencore said the U.S. Commodity Futures Trading Commission is investigating whether the company and its units have violated some provisions of the Commodity Exchange Act and/or CFTC Regulations.

Glencore added that the investigations had a similar scope in terms of subject matter as the ongoing investigation by the U.S. Department of Justice.

Last July, U.S. authorities demanded Glencore hand over documents about its business in the Democratic Republic of Congo, Venezuela and Nigeria as part of a corruption probe.

“The CFTC investigation just reminds the market of the outstanding investigation once more and to have two sets of eyes on you must be uncomfortable,” Grant Sporre, an associate director at Macquarie said.

Sporre, however, noted it was unlikely to be a double penalty in terms of a sanction. Credit Suisse analysts said the CFTC fine could be “in the $10 millions”.

“Until the impact of regulatory risks on potential liabilities, plus Glencore’s business model, can be quantified, it remains difficult to assess Glencore’s investment proposition,” JP Morgan analysts wrote, maintaining its “Neutral” rating.

Graphic: Glencore underperforms mining heavyweights, click

Reporting by Muvija M in Bengaluru and Barbara Lewis in London; Editing by Shounak Dasgupta