Knight Capital Plummets on Refinancing


Shutterstock photo

Knight Capital (NYSE: KCG ) shares fell approximately 25 percent in early trading Monday after the company announced rescue financing that will shore up its books at a steep price. This announcement followed $440 million of errant trading losses last week.

Investing firms in the market maker will receive 2 percent convertible preferred stock that will convert into common stock at $1.50 a share. That translates into about a 70 percent stake in the company, according to an SEC filing.

These investing firms included Jefferies Group (NYSE: JEF ), Blackstone Group (NYSE: BX ), Getco LLC, Stephens, Stifel Financial Corp. (NYSE: SF ) and TD Ameritrade Holding Corp. (NASDAQ: AMTD ).

"We are grateful for the support of these leading Wall Street firms that came together to invest in Knight," said Knight CEO Tom Joyce in a statement. He added that Knight's financial and capital base have been restored to a level that more than offsets last week's loss.

It remains unclear if the financing paves the way for the company to be sold completely. There still could be interest in Knight being purchased outright.

Shawn Matthews, CEO of the broker-dealer unit at Cantor Fitzgerald told Bloomberg on Friday that he is "not sure" whether his company will buy Knight, but acknowledged Cantor's interest in acquisitions generally and that Knight presented both a long-term and short-term opportunity.

Also on Monday, the NYSE said it has temporarily re-assigned Knight's stock custodial role to Getco LLC. The exchange said the move is temporary, and will help Knight's financing effort.

Knight and Getco are cooperating with the plan according to the NYSE.

Knight shares last traded at $2.89 in the premarket, valuing the company at less than $265 million. It had been valued at more than $1 billion prior to the errant stock trading last week caused by a software glitch.

Almost overnight, the software glitch generated a pre-tax loss equal to about 30 percent of shareholders equity in the company, eroding its capital base.

The trading loss was larger than Knight's $365 million in cash on hand, and more than 100 times what the company earned in the second quarter.

(c) 2012 Benzinga does not provide investment advice. All rights reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
More Headlines for: AMTD , BX , JEF , KCG , SF

More from Benzinga




Market Analysis, FinTech
Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by