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Knight Selling Market Making Unit - Street Talk
November 26, 2012
CEO Joyce Says That's Not Necessarily So.
[ by Melanie Gretchen ]
Knight Capital Group is in no rush to sell. After it lost $457 million in a technical glitch, CEO Tom Joyce said in an internal e-mail that the company is operating at full capacity, according to a person briefed on the matter. Amid expected bids from Getco LLC and Virtu Financial LLC, as reported by the Wall Street Journal, capital levels are strong and no deal will be done unless it makes sense for the company, the person said, requesting anonymity because the communication was private.
"Getco and Virtu would definitely be interested in the market-making business and the retail order flow. If they sold the market-making business, it would make sense to sell simultaneously the other assets to them or somebody else. They don’t have a company once they sell that business. It’s the mainstay." -- Richard Repetto, a New York-based analyst at Sandler O’Neill & Partners LP, in a phone interview.
Where the Jersey City, NJ-based stands now:
- The firm's market-making unit executes about 10% of U.S. share volume
- The company has grown over the last decade from mainly handling orders from individuals sent by brokers to a financial services company with institutional clients, electronic trading services and businesses in fixed income and currencies
- Knight owns the Hotspot FX and BondPoint platforms, provides research and asset management and got into the reverse mortgage business in 2010
-
it had $420.8 million in cash and equivalents as of 9/30/12, according to its earnings report released last month. The company posted a third-quarter net loss of $6.30 a share, the widest since at least 2001.
Getco, an automated market maker like Virtu and Knight, was 1 of 6 investors that acquired stakes when investors bought $400 million of convertible stock to rescue Knight from bankruptcy. (Virtu, on the other hand, does not have an existing stake in Knight). Going forward, Getco said in a filing this month that it will consider transactions including buying or selling Knight shares. For his part, Joyce may have until the end of the
year to negotiate any deals, when his contract expires.
For further details, go to [Bloomberg, 11/25/12].
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