This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Knight Capital Bidding War Begins

Stocks in this article: KCG JEFF SF AMTD BX

NEW YORK ( TheStreet) - Trading firm Getco Securities has offered to buy embattled competitor Knight Capital Group (KCG) for $3.50 a share in cash and stock, after an early August software glitch caused the firm hundreds of millions in losses.

Although $3.50 a share is far below Knight Capital's beginning of year share price above $10, investors should celebrate the unsolicited offer that may yet turn to a bidding war, amid speculation other firms such as Virtu Financial may be circling Knight's assets.

That's because Knight Capital's quick resolution to its trading losses and its takeover offer at a market cap above $600 million will prove financial firms that raise capital quickly in a time of crisis can find a buyer without asking for government support, or going the way of Lehman Brothers and MF Global.

Within days of Knight Capital's early August trading blunder, the company raised $400 million in new capital, which kept the firm in business and may yet pave the way for a reasonably priced takeover. The deal, which issued preferred stock that could be converted into 267 million common shares at a strike price of $1.50, also diluted existing shareholders by over 73%.

Counterparts like Jefferies (JEF), Stifel Financial (SF), Getco and TD Ameritrade (AMTD), in addition to financial heavyweights such as Blackstone (BX), were among the investors in Knight's capital raise. Getco holds roughly 15% of Knight's shares as a result of the funding.

In August, some investors were burned by speculation the company would hold out on a dilutive financing, in favor of a last ditch buyout attempt by a competitor. TheStreet argued Knight Capital's expediency in resolving its biggest issue - quickly eroding capital - was the top priority and not whether the company's chief executive Thomas Joyce could negotiate good M&A terms.

As speculation of a buyout at share prices not seen since the trading blunder mounts, Joyce's focus on capital over deal negotiations appears vindicated. With capital, trading firms like Knight or banks like Lehman can focus on takeover negotiations. Without capital, financial sector investors have seen the time run's dry quickly.

Earlier this week, Knight Capital said it will postpone a quarterly analyst and investor meeting, in a move that may signal some type of deal announcement or negotiations are imminent.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

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