Reports on arranging an emergency line of credit to keep its operations afloat and stanch supports from its clients helped Knight Capital Group Inc.’s (NYSE:KCG) shares surge on Friday wiping out some of the losses made in the previous two days following a snag in its trading system.
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After shedding nearly three-fourths of its value on Wednesday and Thursday, shares of the company closed up 57 percent at $4.05 on Friday.
Clients of the company rallied around it and promised to start routing trades through it again.
Wednesday's mishap caused large volumes of errant trades to be pushed through its system at deviant prices that caused wild price swings in some 140 stocks and losses of $440 million to the company.
Trading and market-making firm Knight Capital takes orders from large brokerage houses and routes them to exchanges for trading.
Knight Capital swung into action to reassure its clients and investors that things would soon be under control. It advised many of its clients to look for alterative channels to route their trades, while it got its system back in order.
However with losses wiping out what it earned last year, the company's financial position is critical and it has to get funding in order to keep running its operations smoothly.
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The company did make a statement that it was arranging funds and looking at strategic alternatives, which many have taken to mean that it might bring in a partner to whom it might sell a stake.
The company will go into the weekend trying to wangle funds as well sew up a deal that could ensure its long-term survival.
Reuters reported that at least one private equity firm, TA Associates, signed a non-disclosure agreement with the firm, a signal that it was looking at Knight's books for a potential acquisition or investment. It said TA Associates did not comment on the news.