Knight Capital Says It Has $400M Financing Deal

By: Associated Press
By: Associated Press

NEW YORK (AP) -- Knight Capital Group, the trading firm responsible for last week's stock market mayhem, has avoided collapse by lining up a $400 million lifeline from a group of other Wall Street companies.

But the money comes at a steep price.

Knight says it will get the cash infusion from an investor group led by Jefferies Group, as well as Blackstone, Getco, Stephens, Stifel Nicolaus and TD Ameritrade. In exchange, the group will receive stock that can be converted to a 73 percent stake in Knight. That means Knight is essentially handing over control to the investor group. Knight will also add three directors to its board.

Knight's stock has mostly been in free-fall since a massive computer error in its systems last Wednesday sent huge numbers of erroneous orders flooding into the market, causing dozens of stocks to swing wildly in heavy volume. Knight said the foul-up would cost the firm $440 million as it paid for stock positions it mistakenly bought. Knight's stock was down another 18 percent this morning.

The foul-up was the latest in a string of high-profile technical problems that have left some investors convinced they can't trust the financial markets.

(Copyright 2012 by The Associated Press. All Rights Reserved.)

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