One company is breathing a sigh of relief after a trading glitch sent shares of Knight Capital Group from more than $10.30 to nearly $2.50 last week.
Blackstone became an investor in Knight Capital after the glitch. But even beforehand, its private equity arm had been looking to take the company private for months before last Wednesday’s glitch, according to a senior Blackstone executive consulted by Business Insider.
While the official said that the PE team had not yet finalised their plans or arrived at a valuation for the market-making company, they were in “very serious discussions” with Knight before the trading failure.
This acquisition would have cost them a lot more than what they ultimately paid after the trading glitch forced Knight Capital’s stock price down.
Since last week, Blackstone has become an important investor in Knight, joining a group of financial firms that provided it with $400 million the firm received to bolster its capital base. Knight estimates it took a pre-tax loss of $440 million during the 45 minutes needed to resolve the technical glitch.
Despite the earlier negotiations, Blackstone took a “very serious” look at Knight’s books after the trading catastrophe. “It’s like looking at a house before the fire and then looking at it again after,” the executive said.
A trader consulted by Business Insider said that Blackstone envied Knight Capital’s market-making team, which executed an average of more than $20 billion trades last year and is designated market maker for 680 securities traded on the New York Stock Exchange.