- Tools for Investors
- Stock News
- Investing Ideas
- Econ & Policy
- Personal Finance
Chicago-based high-frequency trader Getco LLC has officially offered to buy Knight Capital Group (NYSE:KCG) for about $1 billion in cash and stock, or about $3.50 per share. Getco’s bid countered an offer from Virtu Financial LLC, which offered a cash takeover of Knight Capital for $3 per share.
With competing offers on the table, many are expecting a bidding war to begin.
CHEAT SHEET Analysis: Is a Merger a Good Thing for Knight?
One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. Mergers and acquisitions or joint ventures are always events investors should watch closely.
Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.
According to Bloomberg, “Getco is proposing a two-step reverse merger in which Knight would be reorganized as a holding company with Getco receiving 242 million newly issued shares and warrants to buy 69 million more. The company would then make a tender offer for up to 154 million Knight shares — about half those outstanding, excluding Getco’s stake — at $3.50, or about $539 million. Getco’s existing stake in Knight, about 57 million shares, would be retired.”
How Will This Affect Knight Capital’s Stock?
Knight Capital made headlines at the beginning of August when it lost about $461 million due to a technical error. The company’s stock price crashed 75 percent pretty much over night and the firm was only saved thanks to a bailout by a consortium of investors led by Jefferies Group (NYSE:JEF) and Blackstone Group (NYSE:BX). Since then, the company’s stock has floundered at less than $3 per share.
With its stock price eviscerated, Knight Capital became a ripe target for takeover in an industry suffering from overcapacity. News about the buyout and possible bidding war has brought the stock up over 36 percent in the last five trading days and on November 28 shares are trading about 10 cents shy of the $3.50 offered by Getco.
Knight Capital’s stock price is bound to shift with any new offers should a bidding war take place. The company will likely hold out and wait for the best offer possible in order to return value to those who bailed it out and are now shareholders.
Don’t Miss: Is This Analyst Predicting Apple’s Doomsday?
Don't miss one of the biggest bull markets in history! Covers Gold, Silver, Gold & Silver stocks, and miners.
There's always a bull market in some sector! Find the best opportunities in commodities.