Paul Galt at Bernstein wonders: Could Glencore (OTCPK:GLCNF) take a page out of Elon Musk’s playbook and take itself private at £420/share (or, a number much lower than that)?

The biggest difference between Glencore and Tesla is that one generates huge positive cash flow, and the other doesn’t. So Glencore doesn’t need funding to take itself private.

“It simply needs to continue doing what it has already started to do earlier this year and use its prodigious organic cashflow generation to buy back its own undervalued paper. Indeed, it should continue to do so until the free cash flow yield on its own stock is lower than the fully risk weighted expected return on any other use for that cash; around 6% to 8% would seem a reasonable number to us.

But a 6% FCF yield on ~$9B of FCF gives us a market cap of $150B, or £116B vs. £47B today!"

Now read: Glencore: High Depreciation Charges Are Hiding Strong Cash Flows »


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