Why Knight Capital Shares Spiked

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of embattled Knight Capital Group (NYSE: KCG  ) popped 14% today after fellow trading firm Getco Holding offered to merge with it.

So what: The cash-and-stock proposal values Knight Capital at $3.50 per share and represents an 18% premium to its closing price on Tuesday. Of course, the stock has been surging since Friday on reports that Knight had spoken to at least two rivals regarding the purchase of its market-making business, suggesting that Getco's offer is far from a done deal.

Now what: Getco, which already owns about 30% of Knight Capital, said the merger would be a two-step process in which 242 million new shares are issued, followed up by a tender offer for an additional 154 million shares. "[B]y structuring the transaction with both cash and equity components, Knight shareholders are able to realize an immediate return on investment, as well as preserve the opportunity to participate in the future growth of the combined company," Getco CEO Daniel Coleman wrote in a letter to Knight. So while I'd expect competing bids in the upcoming days, using today's surge to take at least some dough off the table seems like a prudent move for Knight shareholders.

Interested in more info on Knight? Add it to your watchlist.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2130986, ~/Articles/ArticleHandler.aspx, 9/21/2014 12:36:54 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement