The Jersey City, N.J., market maker and facilitator of electronic transactions for wholesale trading clients announced before the market open that it had incurred a pretax loss of $440 million, after glitches in its trading software on Wednesday "sent into the market a ton of orders, all erroneous, so we ended up with a large error position which we had to sort through the balance of the day," according to Knight Capital CEO Thomas Joyce, who was interviewed on Bloomberg TV.
Knight Capital announced early Thursday that it was "actively pursuing its strategic and financing alternatives to strengthen its capital base."
Stifel Nicolaus analyst Matthew Heinz said on Thursday that Knight Capital would be worth roughly $3.40 a share in a takeout, while KBW analyst Niamh Alexander said "the Board needs to sell this company ASAP in our opinion if it can't get private financing to shore up capital," and listed Goldman Sachs (GS), Credit Suisse (CS), and Cantor Fitzgerald, JPMorgan Chase (JPM), Interactive Brokers Group (IBKR), and Jefferies (JEF), as possible bidders.The Wall Street Journal reported Thursday afternoon that Knight Capital was negotiating with Virtu Financial LLC over a possible deal, while also seeking funding from JPMorgan Chase, according to unnamed sources. The broad indexes all saw 1% declines after European Central Bank president Mario Draghi followed up his statement a week earlier in London that the ECB was "ready to do whatever it takes to preserve the euro," by making no concrete statements on any new policy initiatives being taken by the central bank to shore up Europe's economy. Draghi did say that in order to bring down the hefty risk premiums on sovereign bonds of certain eurozone nations, "policy-makers in the euro area need to push ahead with fiscal consolidation, structural reform and European institution-building with great determination," while standing ready to "activate the [European Financial Stability Facility and/or the European Stability Mechanism] in the bond market when exceptional financial market circumstances and risks to financial stability exist." When asked if he was "rolling back" from his strong words from last week, the ECB president said "the stance behind the speech was an affirmation that the euro area is a strong place in the world and that the euro is a strong currency, and it's irreversible," according to a Bloomberg transcript.
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