Knight Capital Survives the Weekend, with Exponential Dilution (KCG, BX, SF, AMTD, JEF)

Reports were out over the weekend that Knight Capital Group Inc. (NYSE: KCG) was raising some $400 million in bailout and survival capital. The company confirmed this in an SEC filing on Monday morning, but those speculators who bought on Friday hoping for a bailout are getting squeezed on dilution right now. Here is the SEC filing notice:

On August 6, 2012, the Company entered into a securities purchase agreement, by and among the Company and the investors signatory thereto pursuant to which the Investors agreed to purchase an aggregate of $400 million of 2% convertible preferred stock of the Company. The Preferred Stock will be convertible into approximately 267 million shares of common stock of the Company. The Company expects the transaction will be consummated later this morning.

CNBC reported that the investors include the Blackstone Group LP (NYSE: BX), Getco, TD Ameritrade Holding Corp. (NYSE: AMTD), Stifel Financial Corp. (NYSE: SF) and Jefferies Group Inc. (NYSE: JEF).

Google Finance showed that before the new shares, the share count was close to 98.2 million shares. What will 267 million new shares do to the old shares? Major dilution.

To show just how bad this dilution is being received, Knight Capital shares are down 30% at $2.82 this morning in premarket trading, after closing up at $4.05 on Friday. The new 52-week trading range after adjusting for last week’s implosion is $2.27 to $14.00.

JON C. OGG