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FBN’s Charlie Gasparino with exclusive details of investors’ worries about Knight Capital management’s failure to impose safeguards before its g...
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-- today.
Big news on Wall Street today also for Knight capital the -- getting a lifeline to survive is.
Investors agreed to a convertible issue as first discussed here on Fox Business last week.
As one of those options on the table to save the -- now several firms -- -- out of the deal but why did so many firms say no food.
To that deal Charlie Gasparino -- now has -- exclusive details jolly.
Well it's kind of interest themes go to the firms was obviously virtue of fairly significant market making firm run by -- violent form former head of the -- And there are a lot of other Citadel of fastest thing KKR look as this thing.
I I would say -- many firms is invested in this also looked past a buyout or even -- a marginal investment in in night.
Why is that well it came to two very attention while they were looking at the books three sort of main problems with this company.
And I say this we're going to be talking more about the main problems in the three.
And maybe what does this convertible bond deal mean a lot of times you know -- been failing firms that have -- available convertible bond yields right before they failed.
It's often the last stop before bankruptcy but he over the three things.
That basically boiled down to it is on these players -- bowed out number one there worried about the technology if us growth can happen once.
It could happen again the second thing is they're worried about how management and this is -- Management failed to impose the safeguards.
On that computer program that went haywire that led to the the alone the -- is trade that led to the 400 plus million dollar loss.
-- -- to sort of -- it until.
The thing was you know off the tracks I think was 45 minutes later they found out that there was a problem with this with this new computerized trade as soon as an algorithm.
And that means there were almost zero safeguards involved number three we're prepared potential investors are worried about.
-- itself a lack of integration among its various visits guess we -- -- -- night.
As a market making firm but there's a lot of other stuff they do all sorts of -- -- futures brokerage they have various different businesses.
That for some reason you know Tom Joyce -- CEOs and I was very cable guy.
We have not been integrate -- inside -- firm.
So put all that thing that feels that if those before sort of broad.
Areas of night -- business units but there -- a lot of businesses inside those units.
So I guess you put all those things together and that debt scared a lot of a lot of potential biases including the sort of the big guys KKR.
You know people like Citadel people -- -- who had the money essentially to buy out night remembered that would have been preferable deal than this this is a convertible deal.
That's very that that's very.
-- of the stock is trading at about three dolls which is twice.
These sort of strike price on the dilution which is you know not bad actually pretty good pretty good but still.
It's below the four dollars that allowed people jumped in last week at the end of the week last week.
When they thought -- you know there's a potential for a buyout on Friday the stock shot up we would afford else.
We were first report about that but both about virtue backing out and the -- -- convertible deal which we we did point out it was highly dilutive so you lost money and that she can't believe Fox Business Network.
Guys back -- you.
And -- very quickly you know you mentioned you outlined three areas of concerns -- why some of these.
That investors would not tempted to jump in so why would the others.
Tempted to jump -- why did they ignore these warning signs of technology of the management failure of the worried about the way -- -- itself is set up.
You know you have to really ask them.
That's my -- -- the for the second answer is they.
You know these -- -- firms that benefit from night.
Member you know TD Ameritrade is is that permits and sort of float -- night night I -- and conduct some its business.
Get those competitor so that's kind of interest -- Blackstone Group.
Private equity always looking for money to put in Stiefel Nicholas I would say that's an order flow provider I guess they all have different reasons.
To get it we -- -- -- out they got a pretty good deal.
Right to have you think of their strike price and a dollar fifty.
It's trading at three today -- get a good deal this but still there weren't there were enough sort of warning signs that kept a lot of others away.
That you know like I said you know these are potent than the -- plays a backed off.
Are pretty major players.
You know these they -- they clearly so something.
They it is likely some markets -- made of people take one -- take another -- you know we capital added that for every futures contract you gotta you have a bet that coffee prices are going up.
And coffee prices are going down.
And you kind of have that here you know at night and night is kind of a company that nobody really knows what weird it's going.
But we should point out the guys who did invest did not invest cheaply.
-- they basically.
You know the -- -- tonight you know cannot be happy right now.
They've been -- in a tremendously.
All right as always ahead of the game Charlie Gasparino Charlie thank you very.
