Knight Capital Group Inc. (KCG) shares rallied following a report the firm advised some clients it obtained a line of credit, easing concern the market maker will collapse following a $440 million loss from a software bug.
Knight shares jumped 23 percent to $3.17 at 9:47 a.m. after the Wall Street Journal said the credit line will allow the company to operate for the day and Knight asked firms to resume routing trades as usual. The newspaper cited people familiar with the matter. Knight spokeswoman Kara Fitzsimmons didn’t immediately respond to requests for comment. The shares had plunged 75 percent in the previous two sessions.
Jersey City, New Jersey-based Knight, one of the biggest American market makers, is exploring strategic and financial alternatives as a software malfunction cost the company almost four times what it earned last year.
Knight fought to preserve its business as concern grew about its solvency. Analysts at CLSA Credit Agricole Securities said yesterday bankruptcy was a possibility if it failed to get financing. The trading fault, which caused stocks to swing as much as 151 percent, left the firm with a “large error position,” Knight Chief Executive Officer Thomas Joyce told Bloomberg Television’s “Market Makers” program with Erik Schatzker and Stephanie Ruhle yesterday.
Knight’s $440 million loss compares with net income of $115.2 million in 2011 and was more than the company’s market value of $253 million at the close yesterday, data compiled by Bloomberg show. The company was worth as much as $4.8 billion in 2000 and valued at more than $1 billion before the incident, according to data compiled by Bloomberg.
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