Updated Aug. 7
Knight Capital Group has received $400 million in equity financing from a group of investors including Blackstone Group.
Under the deal that closed Monday, Knight Capital issued 2% preferred shares that may be converted into Knight Class A common stock at $1.50 per share, according to a Knight news release.
The investor group also includes automated trading firm Getco, and brokerages Stephens, Stifel Financial, TD Ameritrade Holding and Jefferies Group, which also was the investment banker on the deal. NYSE announced Monday that Getco will take over Knight Capital’s market-maker duties. Knight executes about 10% of U.S. shares.
Blackstone Group is offering some of the financing through its Blackstone Capital Partners VI, said spokesman Peter Rose. Blackstone will get one of the three new board seats Knight is creating as part of the deal.
Blackstone Capital Partners VI paid invested about $86.9 million in exchange for 86,927 in preferred Knight Capital stock. Two funds for Blackstone employees to invest in alongside the BCP VI fund paid about $573,000 for about 573 securities.
Blackstone funds are the third largest holder of these securities in the financing group behind Jefferies and Getco. Jefferies and broker-dealer Jefferies High Yield Trading LLC together paid $125 million for 125,000 securities and paid $87.5 million for 87,500 securities.
“We see an attractive upside,” Mr. Rose said of the deal.
Blackstone executives have made no decisions on whether and when it will convert its preferred stock into common shares, Mr. Rose said.
Problems with the installation of trading software on Aug. 1 resulted in Knight Capital sending a number of erroneous orders in NYSE-listed securities into the market, causing a $440 million loss for the trading firm.
Investors in Blackstone Capital Partners VI, which closed in January, include the $150.6 billion California State Teachers’ Retirement System, the $237.5 billion California Public Employees’ Retirement System, $72.1 billion New Jersey Division of Investment and $10.8 billion Los Angeles City Employees’ Retirement System.