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.
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