Knight Capital Group shares rebounded today following a rescue deal that undercut existing investors and left a number of open questions about the embattled firm's valuation and plans.
Knight shares were initially down in premarket trading before rising 3.6 per cent to $3.18. One week ago, before a devastating trading loss caused by a software glitch, the stock traded above $10.
Yesterday, Knight kept its doors open because of a $400 million rescue from a consortium of investors, who will now own 73 per cent of the equities market maker.
While the deal comes at a steep cost for existing investors by diluting their stakes, it was a home run for the consortium. Those investors can convert their preferred stock to common at $1.50 per share, half of where Knight is trading now.
Knight chief executive officer Thomas Joyce yesterday said that the firm would look at its business units over the next few months and decide whether all of the parts should remain in place.
JPMorgan analysts have suggested that investors will look at Knight only as the sum of its parts, in expectation of an eventual breakup.
Among the most attractive assets are foreign exchange platform Hotspot FX and Urban Financial, the second-largest reverse mortgage lender in the United States.
Reuters
