Knight Capital

Knight Capital Group Inc. (NYSE:KCG)? released a report this morning, which states they were hammered with a $440 million loss, following yesterday’s market mishaps, according to David Benoit, of the Wall Street Journal.

Knight Capital Group Inc. (NYSE:KCG) admitted that the loss has “severely impacted” its capital, and they will be looking to stop the bleeding and restore it as quickly as possible. In premarket trading today, Knight’s stock had dropped by 59%, which only reiterated yesterdays drop of 33%.

How major is this loss to Knight? As of Tuesday’s closing bell, the company’s market capitalization value was $1.01 billion. Yesterday’s fiasco cost them $332.9 million in available market capital. Their recently released earnings report, showed a profit of $3.3 million, and a total revenue of $332.9 million, for the 2nd quarter. At the end of June, Knight had approximately $364.8 million of cash on hand, and equivalents, while the fair value of all of the financial instruments owned, equaled $5.03 billion. The company complained about the major losses suffered at the hands of the Facebook IPO earlier this year, however, those losses, which totaled $35.4 million, seem very small in the wake of recent events.

Knight has had a rough year this year, what with the botched Facebook IPO held over their head, and now this. The firm announced yesterday that something had gone wrong with an algorithm, causing their market making computer bank to mishandle approximately 150 shares of NYSE traded stocks. Knight issued a statement, which said their research indicated,”a technology issue” in the company’s market making computer caused the shares to be rerouted, and force d the market to plunge 30%. Original estimates from analysts suggested that Knight would be holding the bag for $300 million, but we have seen that this figure was vastly overshadowed by the actual ones. These lasses have hit Knight Capital very hard, and investors are more than a little worried.

Will Knight recover its losses and move on, or could this be the beginning of the end for the huge investment firm? We shall have to wait and see. We will keep you posted here at ValueWalk as new details emerge.