By Jacob Bunge
Shares of Knight Capital Group Inc. (KCG) jumped Friday on
investor optimism that one of its new stakeholders could pursue a
closer relationship with the U.S. trading firm.
Chicago-based Getco LLC late Thursday filed documents with
regulators regarding its stake in Knight that analysts viewed as
providing it with more options around its position in the firm.
"Based on the filing, it appears Getco has opened the door and
given themselves more flexibility to evaluate Knight beyond just an
investment," said Richard Repetto, analyst with Sandler O'Neill
& Partners LP.
Shares in Knight recently were 7.4% higher at $2.53.
Getco, a specialist in high-speed market-making, joined with
five other financial firms in early August to provide $400 million
in rescue funding to Knight after an errant trading program drove a
$461.1 million loss. The partners were allotted preferred
securities in that deal.
Getco invested $87.5 million, earning the firm a stake that
translates to about 16% of Knight's shares once all of the new
investors' preferred securities have converted to common stock.
In Thursday's filing, Getco officials updated legal language to
say that they "intend to evaluate their investment in [Knight] on
an on-going basis, which may include consideration of transactions
or other matters," though such an evaluation may not result in any
purchase or sale of Knight's securities.
Other Knight stakeholders have used similar language to describe
their view on their holdings in the firm.
Getco and Knight operate trading businesses that compete in some
ways, and complement one another in other ways. Both are big
market-makers in U.S. stocks and other securities, quoting prices
to buy and sell on exchanges and other trading venues.
Getco's main business lies in trading for its own account, while
Knight is among the biggest direct traders with online brokers that
service the orders of retail investors.
While some analysts flagged increased potential for closer ties
between the two firms, others saw little more than boilerplate
language in the Thursday filing by Getco.
"Getco or anyone else could do a deal with [Knight] at any
time," said Roger Freeman, analyst with Barclays PLC, in an email.
"I don't think [companies] make a habit of revealing their M&A
strategy in regulatory filings."
Spokeswomen for Getco and Knight declined comment.
Knight Chief Executive Thomas Joyce last month told analysts on
a conference call that he was open to exploring "any and all
alternatives" to deliver value to shareholders of the firm, if
efforts to restore its businesses did not bear fruit.
Write to Jacob Bunge at jacob.bunge@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires