After
reporting a massive $440 million loss,
Knight Capital Group Inc. (NYSE:KCG) will finally
get a finance deal from a group of investors worth $400 million. Within a span of four days, Knight Capital has gone
on from being one of the pillars of Wall Street to a business desperately
looking for a lifeline for long term survival.
It
all started with a 45-minute software
glitch on 1st August that created confusion among dozens of
stocks as unintended orders were
forwarded to NYSE that increased the
values of some of those stocks by more than 100% and eventually left Knight
Capital with $440mn trading loss.
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Costumer
confidence nearly vanished and the company’s
shares dropped from $10.33 last Tuesday to $2.58. Such circumstances forced
Knight’s CEO Thomas Joyce to appear
in public for the first time. "You cannot keep people from doing stupid
things," said Mr. Joyce while talking to Bloomberg, “That is what happens
when you have a culture of risk."
Due
to the deal, the firm will be able to open its doors on Monday and will continue
serving its premier clients that include TD
Ameritrade, Vanguard and Fidelity Investments. The deal is
expected to be signed early Monday. According to Reuters, it will come at a “steep
cost” to the shareholders.
Some
of Knight’s clients, such as TD Ameritrade Holding Corp. (NYSE:AMTD) came in support of the firm. "They've been a good and
trusted partner," TD spokeswoman Beth Evegan said. TD Ameritrade is the top U.S. brokerage firm in terms of
volume and deals exclusively with Knight Capital. Citing an insider source, Reuters
has reported that TD is practically “handcuffed
to Knight”.
On
the other hand E-Trade Financial and Vanguard have said that they were currently
monitoring the situation and did not comment further.
Your
Comments and Feedback are always appreciated
Relevant
Links
Knight
Battles for Survival [The Wall Street Journal]
Knight
Capital Group hustling to find a buyer or secure funding [Los Angeles
Times]
.