[ by Melanie Gretchen ]

Knight Capital Group, in a sense lucky to have survived its disastrous 8/1/12 trading spree - that resulted in losses of $462mn, no thanks to CEO Tom Joyce - has been sued by investor who contends the stock is undervalued in a $3.75-a-share takeover by Getco LLC.  In this litigious world, it's not surprising that an investor would file suit, because he or she probably owned the shares when they were trading in the $12-$13 range - i.e., prior to 8/1/12.  It was a bitter and tragic fall.

Nevertheless, the trading firm survives today only through the good graces of a massive capital infusion provided by 6 firms.  Those firms invested $400 million into Knight, in exchange for a combined 70% stake in the business.   Getco was one of those firms.

At its low point, KCG shares traded as low as $2.24 - which means the $3.75 offering price is a 67% premium to that all-time low.   The complaint, however, charges Knight management and directors with opting not to seek out the best price for company shares, and instead they "locked-up" the Getco deal - in an apparent violation of those duties, shareholder Ann Jimenez McMillan said in a Delaware Chancery Court. complaint.

Terms of the The Deal. Getco, a Chicago-based trader, earlier this month agreed to buy Knight.  The $1.4 billion deal ended the bidding war between Getco and rival suitor Virtu Financial LLC.  However, now Knight faces a new obstacle: shareholder complaints.

The price is "unfair and grossly inadequate," and will deny investors “their right to share proportionately and equitably in the true value of the company’s valuable and profitable business, and future growth." -- the plaintiff’s lawyers, in court papers.

Ms. McMillan is asking the court to grant her lawsuit class-action, or group, status, on behalf of all outside stockholders, with the intent of collecting unspecified damages, and an order to stop the deal under its present terms.

The case: McMillan v. Knight Capital Group, CA8163, Delaware Chancery Court, (Wilmington).

For further details, go to [Bloomberg, 12/31/12].