Knight Gets $400 Million Infusion in Sale of Convertibles
Knight Capital Group Inc. received a $400 million cash infusion through the sale of convertible securities after trading losses spurred by a software failure drove the market maker to the brink of bankruptcy.
Investors agreed to buy preferred stock that will be convertible into approximately 267 million common shares, according to a company filing today. Getco LLC, the automated trading firm backed by General Atlantic LLC, Blackstone Group LP, brokerages Stifel Nicolaus & Co. and TD Ameritrade Holding Corp. (AMTD), and the investment banks Stephens Inc. and Jefferies Group Inc. are investing, according to two people with direct knowledge of the matter, who asked not to be named because the agreements aren’t public.
Knight, whose market-making unit executes about 10 percent of U.S. shares, has been fighting for survival since a computer breakdown spewed orders through stock exchanges Aug. 1 and led to a $440 million loss. The mishap spurred calls in Congress to examine whether increasing automation is damaging the integrity of the U.S. equity market, the world’s largest with $16.4 trillion in share value.