Knight Capital Group Inc. (NYSE: KCG), which lost $440 million last week when a trading program it had just installed went berserk, confirmed Monday it reached a $400 million rescue deal that will keep the big market maker in business but hammer existing investors.
A group of investors will buy 2 percent preferred stock convertible into about 267 million shares of common stock, implying a stake in the New York financial services company of slightly more than 70 percent. The deal was expected to close Monday.
Knight did not name participants in the investor group in its Securities and Exchange Commission filing confirming the rescue, but Bloomberg News said Getco LLC, the automated trading firm backed by General Atlantic LLC, Blackstone Group LP, brokerages Stifel Nicolaus & Co. and TD Ameritrade Holding Corp. (AMTD), plus investment banks Stephens Inc. and Jefferies Group Inc. are in the group.
Shares fell 29 percent to $2.87 in premarket trading.