Knight Capital has announced a $400 million investment infusion to rescue it after a trading debacle cost it $440 million last month.
But the cash infusion is massively dilutive, equity investors are getting totally hosed.
The stock is down 40% this morning.
Here’s the full announcement in an 8-K filing:
Knight Capital Group, Inc. (the “Company”) is filing this Current Report on Form 8-K to update certain items in the historical consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. Historical information was updated following an August 1, 2012 technology issue related to the Company’s installation of trading software which resulted in the Company sending numerous erroneous orders in NYSE-listed securities into the market.
As a result of this issue, the Company has realised a pre-tax loss of approximately $440 million. In addition, the historical consolidated financial statements were revised to reorder the presentation of the Company’s Consolidated Statement of Comprehensive Income and Consolidated Statements of Changes in Equity, as required by Financial Accounting Standard Board Accounting Standards Update No. 2011-05. Exhibit 99.1 contains the updated and revised financial information.
On August 6, 2012, the Company entered into a securities purchase agreement, by and among the Company and the investors signatory thereto (the “Investors”) pursuant to which the Investors agreed to purchase an aggregate of $400 million of 2% convertible preferred stock (the “Preferred Stock”) of the Company. The Preferred Stock will be convertible into approximately 267 million shares of common stock of the Company. The Company expects the transaction will be consummated later this morning. The Company is also filing a complete copy of its Certificate of Incorporation, as amended, as Exhibits 3.1, 3.2 and 3.3 hereto, although no changes to such Certificate of Incorporation have been made.