This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Knight Needs More Than Loan Armor (Update 2)

Updated with comments from Fitch Ratings, CRT Capital Group analyst Keven Starke, and market close informatoin.

NEW YORK ( TheStreet) -- Knight Capital Group (KCG - Get Report) bounced back in a big way on Friday, following a report that the firm had obtained a credit line allowing it to operate for another day.

The shares shot up 57% to close at $4.05, amid a very strong market rally on surprisingly strong job growth numbers, after the Wall Street Journal reported that Knight Capital had told its clients that the company had obtained a new credit line, allowing it to continue processing trades for its customers for another day.

Shares of the Jersey City, N.J., market maker and facilitator of electronic transactions for wholesale trading clients announced dropped 63% on Thursday, after Knight Capital announced 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."

KBW analyst Niamh Alexander had said on Thursday that "the Board needs to sell this company ASAP in our opinion if it can't get private financing to shore up capital," because "continuing independently will be challenging without more capital."

Potential acquirers for Knight Capital, according to Alexander, include Goldman Sachs (GS), Credit Suisse (CS), and Cantor Fitzgerald, all of which "recently expressed interest to expand into wholesaling organically." The analyst said that KBW would potentially consider JPMorgan Chase (JPM - Get Report), Interactive Brokers Group (IBKR), or Jefferies (JEF), to be buyers "as they would likely be interested in the trading technology and the retail wholesale network while also potentially eliminating a competitor in the trade execution institutional business."

While investors were clearly breathing a sigh of relief -- pushing Knight Capital's shares well above the takeout value of $3.40 estimated by Stifel Nicolaus analyst Matthew Heinz on Thursday -- other Wall Street firms were shying away, with the Journal reporting that TD Ameritrade (AMTD) and E*Trade (ETFCO) we not routing trade orders through Knight Capital.

Knight Capital in June renewed a $200 million credit line with a group of banks led by U.S. Bancorp (USB) subsidiary U.S. Bank, NA, that included bank subsidiaries of Bank of America (BAC), Bank of Montreal (BMO), and JPMorgan Chase (JPM - Get Report).

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
JPM $61.30 -0.45%
KCG $12.58 0.52%
AAPL $128.45 -1.50%
FB $78.94 -1.80%
GOOG $558.64 0.57%

Markets

DOW 18,132.38 -82.04 -0.45%
S&P 500 2,105.78 -4.96 -0.24%
NASDAQ 4,964.3370 -23.5530 -0.47%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs