Posts Tagged ‘Blackstone’

Article from SFGate.

The Knight Capital Group Inc. trading firm said it lost $764.3 million in the third quarter because of a software glitch that flooded the stock market with trades one day in August, causing dozens of stocks to fluctuate wildly.

Knight said Wednesday that the software glitch cost it $461.1 million in financial losses. The company also took a charge of $143 million to reflect its weaker brand and competitive position after the episode.

The problems began for Knight early on Aug. 1, when dozens of stocks started rising and falling sharply for no apparent reason. Wizzard Software, for example, shot up above $14 after closing the night before at $3.50.

Knight takes stock trading orders from big brokers like TD Ameritrade and E-Trade. It routes the orders to exchanges including the New York Stock Exchange.

After Knight acknowledged that a technical glitch in its software had caused the disruption, its stock lost three-fourths of its value in two days. Knight had to cede control of its operations on the New York Stock Exchange and obtain a financial rescue from Wall Street peers.

Knight, based in Jersey City, N.J., managed to eke out a small profit after excluding losses from the trading fiasco. Its stock rose 5 percent in premarket trading.

Knight’s loss amounts to $6.30 per share for the period ended Sept. 30. That compares with net income of $26.9 million, or 29 cents per share, a year ago.

The technology issue accounted for a financial loss of $2.46 per share, plus 76 cents per share for the related impairment charge.

Excluding those and other one-time items, Knight said it earned a penny per share. Analysts had forecast 2 cents per share, according to a FactSet survey.

Chairman and CEO Tom Joyce said that the company was gratified that it managed a small profit on an adjusted basis.

“I believe the recovery to date speaks to the strength of our offering, the dedication of Knight’s client teams and deep client relationships we enjoy,” he said.

Net trading revenue was negative because of the software glitch. Knight Capital’s market making segment was hit the hardest, reporting net negative revenues of $341.2 million.

After the trading losses threatened its survival, Knight received $400 million from an investor group that included Jefferies Group, Blackstone, Getco, Stephens, Stifel Nicolaus and TD Ameritrade. The investors received stock that can be converted into a 73 percent stake in Knight, which means Knight essentially handed over control to the investor group.

Knight also added three directors to its board, increasing its size to 10 members.

Knight’s stock slipped 5 cents to $2.53 in morning trading Wednesday. Its shares fell to a 52-week low of $2.27 in August. They traded as high as $14 per share almost a year ago.

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Here is some upbeat news from BusinessWeek.

“After months of market turmoil, are investors finally ready for a slew of brand-new stocks?

The owners of some private companies think so. In early August, Hyatt Hotels & Resorts announced plans to raise about $1 billion through an initial public offering. There’s speculation that buyout giant Kohlberg Kravis Roberts is preparing retail chain Dollar General (DG) for a stock debut. Last month 12 companies filed with regulators to go public—the most since investment bank Lehman Brothers failed back in September 2008.

The conditions for IPOs have improved dramatically since the desolation of last winter. Stocks have rallied from their lows. And new companies are outperforming blue chips: The FTSE Renaissance Capital IPO Composite Index, which tracks the returns of IPOs, is up roughly 33% this year, vs. 7% for the Dow Jones industrial average. “Nobody’s pushing any dogs here,” says Gregg Slager of Ernst & Young’s private equity consulting group.

To be sure, the glory days aren’t back. The pipeline, though improving, isn’t bursting with new listings: At the peak of the boom, dozens of companies filed to go public each month. And obviously the businesses can’t raise $18 billion at a pop, as credit processor Visa (V) did with its offering in 2007. While the largest IPO of this year, Starwood Property Trust, raised the size of its offering from $500 million, it still raked in just $800 million in early August.

But the increased IPO activity may signal that the recession is easing—or at least that investors think the economy is on the mend. “There’s confidence in the market,” says Harris Smith, managing partner of private equity for Grant Thornton, a consulting firm. And “there’s pent-up demand for new, quality stocks.” After the dot-com bust, new stock offerings picked up just as the economy started to turn.


Private equity owners are the most active participants in the IPO markets nowadays. Of the 16 companies that have gone public this year, 8 are backed by buyout firms. And more IPOs are in the works. “There are a couple of companies that are definitely candidates [for going public],” Tony James, chief operations officer of Blackstone (BX), said in a recent earnings call. “If the markets hold up and continue the trend, you will see some IPOs from our portfolio.””

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