The U.S. corruption and money-laundering probe into Glencore Plc represents the sum of all fears for the world's largest commodity trader and its billionaire chief executive officer, Ivan Glasenberg.
The possibility that the Justice Department would add to the dizzying array of regulatory and legal headaches the Swiss company is facing around the globe - from Russia to Africa and South America - has been a major worry for both executives and shareholders for months, people familiar with the matter said.
Those concerns crystallized Tuesday with the announcement that U.S. investigators have subpoenaed documents related to Glencore's activities in the Democratic Republic of Congo, Nigeria and Venezuela dating back to 2007, sending the shares tumbling more than 8 percent.
The most obvious risk from the U.S. investigation is a hefty fine or settlement, but the stock plunge, which erased $5 billion of market value, far exceeded the largest penalty ever imposed under the Foreign Corrupt Practices Act. That suggests investors have deeper apprehensions, according to Maximilian Hess, a senior political risk analyst at AKE International.
"Glencore was long the business that operated where others could not or would not," Hess said. "That seems like an increasingly untenable position."
The U.S. hasn't made any accusations of wrongdoing or specified what's it's investigating. Glencore said it's reviewing the subpoena and will provide further information as appropriate.
Glasenberg in April had to quit the board of of one of Glencore's biggest aluminum suppliers, United Co. Rusal, after its main owner, Oleg Deripaska, was hit with the most punitive U.S. sanctions imposed on a so-called Russian oligarch.
Glencore's struggles in Congo, where it operates massive copper and cobalt mines, have also come under legal pressure, including a possible bribery investigation by U.K. prosecutors over its work with Dan Gertler, an Israeli billionaire and close ally of Congo President Joseph Kabila, people familiar with the situation said in May.
But the U.S. is casting a wider net with the addition of Venezuela and Nigeria to its investigation, increasing the likelihood that Glencore's management will get bogged down in a lengthy legal process. And any fines or charges that result will only further complicate internal efforts to settle on a successor to Glasenberg, 61.
Glasenberg has run Glencore since 2002 and is also the company's second-largest shareholder, according to Bloomberg data. Two of his closest lieutenants are associated with legal challenges in the countries the Justice Department is focusing on.
Glencore curbed the powers of Aristotelis Mistakidis, its head of copper, after a review of operations in Congo raised questions about accounting and management practices. And Alex Beard, Glencore's head of oil, was named in a 2015 lawsuit filed by a former representative in Nigeria.
Christopher LaFemina, an analyst at Jefferies LLC, said the issue threatens to become a long-term drag on Glencore's shares, much like the ongoing dispute between rival miner Freeport-McMoRan Inc. and the Indonesian government.
"Investors are likely to assume Glencore will have to pay a large fine, and Glencore's cost of capital will increase due to increased risk in general," LaFemina said.
Still, analysts at Credit Suisse Group AG said Glencore shares were undervalued as it could be years before the conclusion of any probe.
The revelation of the U.S. probe is the latest in a string of headaches that have soured what should have been a triumphant moment for Glasenberg.
Glencore's share price has more than quintupled from a collapse in 2015, when a commodity-wide downturn triggered a crisis of confidence in the company. It's been helped by a series of transactions that burnished Glasenberg's reputation as a shrewd dealmaker.
And Glencore's mines, particularly in Congo, which competitors such as Rio Tinto Group and BHP Billiton Ltd. found too difficult to operate in, have given the company pole position in the race to supply metals that are vital to the emerging electric-vehicle market. Yet the African country has also been the source of most of Glencore's woes.
Last year, Katanga Mining Ltd., a Congolese copper producer owned by Glencore, restated financial statements and announced an investigation by Canadian regulators for its corporate governance and accounting practices. Then in December, Gertler, the Israeli tycoon, was sanctioned by the U.S. Treasury, which alleged he'd engaged in "opaque and corrupt" deals.
Glencore has also been battling the Congolese government over a new mining code that hikes royalties and taxes, as well as dealing with lawsuits in the country from Gecamines, the state mining company, and Gertler.
Last month, it settled a dispute with Gertler by agreeing to resume payments to him, in spite of U.S. sanctions against him. The company argued that the deal was the only way to avoid its assets in Congo being seized.
Glencore's Congo assets, which include the world's richest mines for battery material cobalt, represent about a quarter of its overall value, according to analysts at BMO Capital Markets.
It may not be in the U.S. government's interests to press Glencore to stop payments to Gertler, the BMO analysts said, arguing that if the assets were seized, "then it is possible that more than 30 percent of global cobalt supply could end up in the hands of specific third parties, further concentrating the market." Chinese companies are already dominant in cobalt processing and have been increasing their ownership of cobalt mines over the past few years.
This isn't the first time Glencore has found itself in Washington's crosshairs. The company's founder, the late fugitive Marc Rich, was indicted in 1983 in part for trading oil with sanctioned Iran. Rich received a controversial pardon on former President Bill Clinton's last day in office in 2001.
That was a decade before Glencore first sold shares to the public, which made any future corporate missteps much more costly.
"The fine is a tiny part of the damage this sort of thing does to a company," said Karina Litvack, former head of sustainable investment at F&C Asset Management. "Some of that damage can be quantified, but much of it cannot and this unquantifiable cost often dwarfs what can be easily measured."