Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Knight Capital Plummets on Refinancing


The bad news continues for the firm.


Knight Capital (KCG) shares fell approximately 25% 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% convertible preferred stock that will convert into common stock at $1.50 a share. That translates into about a 70% stake in the company, according to an SEC filing.

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

Editor's Note: This content was originally published on by Michael Matthews.

Below, find some more great ETF and market content from Benzinga:

Comcast's NBC Might Make Small Profit on Olympics

eBay Beats Amazon in Same-Day Shipping Race

What is the Trade in Facebook?

Twitter: @Benzinga

Benzinga Pro covers this and all market news in real time. Get your free trial here.

< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos