Monday, August 6, 2012

Knight Capital Group (NYSE:KCG) to Enter Into US$400 Million Deal after a Trading Catastrophe

After the much talked about software mayhem, Knight Capital Group Inc.(NYSE:KCG) is struggling to survive in the market after incurring a loss of $440 million. Reportedly, two potential suitors, Citadel LLC and KKR & Co. have opted out and the company is now looking for an investor.

Citadel has an electronic-trading and market making business. It reportedly walked away from all talks. Founder of Citadel based in Chicago, Ken Griffin could not be reached. Spokeswoman for KKR based in New York, Kristi Huller has refused to comment.

How Should Investors React To The Firm’s Recent Turmoil, Get Free Report

An analyst from Raymond James & Associates Inc., Patrick O’Shaughnessy mentioned in an interview with Pimm Fox for ‘Taking Stock’ on Bloomberg’s Television that there are a lot of questions regarding the liquidity of the company. It may not have enough money to get through the trade agreement. It would be wise for the company to look out for some investor or buyer.

According to latest reports, the company is all set to venture into a $400 million financing contract with a group of investors. This would allow the trading firm to open its doors on Monday after it incurred a lofty loss. A deal as such as help Knight to continue its operation and stay out of further disruption.

The capital is believed to be coming from investors from private equity firms like Getco and Blackstone Group. TD Ameritrade, Jefferies Group Inc., Stephens Inc and Stifel Nicolas are also reportedly involved in this deal. Officials at Blackstone, TD Ameritrade Holding Corp.(NYSE:AMTD), Stifel, and Knight have refused to comment. Getco and Stephens officials could not be reached.

Should Investors Buy KGC Now? Get Trend Analysis

Knight has managed till the weekend after getting short-term finances for market making. Scottrade Inc. and TD Ameritrade had sent trades elsewhere after the software failure at the Knights. Both are said to have been routing their orders back.

Shares of KCG are trading with high volatility. The stock is now down 18% to $3.32, well off session low of $2.59. The stock is still trading 70% lower from its Tuesday’s closing price of $10.33. On Friday, the stock closed higher by 58%.

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