Teck Resources (TSX: TECK.B) was one of the big winners in 2022 and coming into 2023. Shares of Teck stock climbed higher and higher, but a proposed split seems to have been the catalyst to send investors running for cover.
Teck stock remains up by 21% in the last year, but shares have been a bit more turbulent lately. Shares fell by 6% in the last week or so, but have since climbed up a hair. So what’s been going on with Teck stock, and does recent movement make it a buy? Or should investors beware?
What happened
Teck stock is a basic materials company that mines several different types of products. From silver and copper to fertilizer and steelmaking coal, it has a diverse set of revenue that, frankly, the Canadian government is even proud of.
The federal government has wanted to keep at least one strong Canadian basic materials miner in the country. Yet, it looked like this would change when Glencore recently announced the potential to acquire the company in a hostile takeover.
However, this comes after Teck stock announced plans to split the company back in February. One would be focused on sustainable companies, the other on the steelmaking coal business. So environmental, social and governance (ESG) investors could rejoice!
Yet the plan was pretty much immediately shot down by shareholders. The main issue at hand? Almost all money from both companies would simply go straight to the new coal business called Elk Valley. And this would likely go on for the next 11 years. Shareholders were simply unimpressed.
What’s happening now
So now there are other options on the table. The proposed stock split is still there, as well as a hostile takeover of large stakes in the coal business. Yet with this area bringing in so much cash, it’s simply not something Teck stock looks interested in. Even so, the company has had to go back to a proposed split as Switzerland-based Glencore ramps up the takeover.
What makes it hostile? Glencore has stated that if Teck stock won’t negotiate with them over the US$23-billion deal, it’s going to shareholders – hareholders who must question the value behind each decision. That said, it might actually end up in government hands, as the federal government isn’t too keen on having a foreign company in charge of Canada’s large reserves of copper and zinc. Materials that will be essential to the transition to a low-carb and clean energy future.
And don’t kid yourself, the Canadian government can’t absolutely veto this decision. This comes under review when looking at how a foreign investment would affect the Canadian economy. And this would certainly have a huge affect, especially as Glencore hasn’t had the best time of operating abroad, including bribery charges and market manipulation in the past.
So buy or beware?
Should you buy Teck stock right now? I would say no, at least not until this is figured out. Its largest shareholders have already voted against the proposed split, pushing aside the idea of going forward with a split in the company. It’s now cancelling plans to separate, which makes it vulnerable to Glencore’s takeover proposal.
So until some kind of decision is made, I would at beware of Teck stock at least for now.
