BHP Billiton's South32 disappoints in stock market debut

The coming out party for BHP Billiton’s spinoff South32 was mostly quiet on Monday as the ASX-listed company received a value at the lower end of analysts’ expectations.    

Shares for South32 opened at A$2.13 (US$1.71) on the Australian Securities Exchange, way below analyst predictions of more than A$3.20 per share. According to WSJ, the current price gives the mining company a valuation at $A$11.3 billion (a little over US$9 billion).

Shares for South32 settled at A$2.05.

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In weeks leading up to the listing, many analysts had forecast a valuation between US$7 billion and US$13 billion based on the instability of commodity prices.

News of the disappointing outing hit BHP Billiton hard as shares for the world’s biggest miner by market capitalization fell $1.97 to $30.52 in early trading.

“I think it will be Thursday or Friday until everything settles down and we get a real, clear picture on where South32 will trade,” said Evan Lucas, a Melbourne-based analyst at broker IG. “It’s going to be pretty volatile until then, particularly given there was such a massive range of expectations ahead of the debut.”

For South32, the company’s main assets are mines and smelters focused on coal, manganese, aluminium and nickel. The company’ chief executive, Graham Kerr, said the company’s regional model would enable it to improve productivity and performance. “We will aim to combine strong operational performance with financial discipline as we seek to increase shareholder value,” Graham said.

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When asked if he was disappointed by South32’s debut price, Graham said: “I wouldn’t say I’m unhappy, but I’m not focused too much on it, to be honest.

In addition to the ASX, South32 will be listed on the U.K. and South Africa markets.