The Chief Executive Officer of Knight Capital Group Inc., Thomas Joyce, reassured the stakeholders of the company that the capital levels are strong enough and they are not looking forward to any financial deal unless it’s profitable for the company. He also stated that the business should grow without any extra cash inflow and it is currently operating at its full capacity. Incidentally, according to a Wall Street Journal report, both Virtu Financial LLC and Getco LLC are preparing to bid for Knight’s market-making unit. However, there is still no official confirmation made on this issue by either Getco or Virtu Financial. Joyce refused to make any comment regarding this Wall Street Journal report.
Around 10% of the total US share volume is executed by Knight’s market making unit. It’s not only into stock management anymore and has expanded already to other areas of business such as: electronic trading devices, financial servicing, operating in currencies and fixed income, research and asset management, reverse mortgage etc. The company currently owns two famous platforms: BondPoint and Hotspot FX.
According to the recently released earning report, Knight has $420.8 million cash available; however the 3rd quarter net loss is of $6.30 per share. The shares are currently priced at $2.49 per share. The loss marks the widest loss for the company since 2001. Knight, incidentally, had to take help from 6 different financial firms in last August to dodge the bankruptcy. These financial firms include: Blackstone Group LP, Getco, Jefferies Group Inc., Stifel Nicolaus & Co., Stephens Inc and Ameritrade. As part of the transaction, the investors received three board of directors’ positions and they control the company through preferred convertible stocks into 70% of the regular shares. Knight, incidentally lost more than $457 million due to a trading malfunction leading to the bankruptcy.
Richard Repetto, an analyst for Sandler O’Neill & Partners LP, stated that the report of Wall Street Journal may be true and it will be a great opening for Virtu and Getco if they can own the market-making business. However, if Knight decides to sell the market-making business, they will sooner or later, sell other businesses and assets as well. So, for existing in the industry, it’s important for Knight to hold this reported sale back, if at all, such an offer comes through.