Knight Capital (NYSE:
) 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:
), Blackstone Group (NYSE:
), Getco LLC, Stephens, Stifel Financial Corp. (NYSE:
) and TD Ameritrade Holding Corp. (NASDAQ:
"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
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
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
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
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