Will Knight Capital Rise from the Ashes?
In the blink of an eye, Knight Capital Group (NYSE: KCG) has gone from a prominent financial services company to a struggling entity that might not be saved.
When news broke that several institutions, including Jefferies (NYSE: JEF), Stifel Nicolaus (NYSE: SF), Blackstone Group (NYSE: BX), and TD Ameritrade (NYSE: AMTD) had stepped in to provide Knight Capital with $400 million in financing, some believed that the company would survive.
Regardless, investors are not yet satisfied. Since August 1, Knight Capital has lost more than 70 percent of its value. There was hope on Friday when the stock rose nearly 60 percent from its all-time low of $2.58. This morning, however, investors are much less enthused, as Knight Capital shares have dropped by more than 20 percent.
The fallout could be catastrophic. Even if the firm were to make a complete recovery, that would not change the fact that its error (an apparent technical glitch) has already caused problems for Level 3 Communications (NYSE: LVLT), NuSkin (NYSE: NUS), GameStop (NYSE: GME), Goodyear Tire (NYSE: GT), Manitowoc (NYSE: MTW), Corelogic (NYSE: CLGX), Pandora Media (NYSE: P), and Allegiant Travel (NASDAQ: ALGT), among others.
Long-term, corporations and traders are not the only ones that will be caught in the crossfire. Knight Capital might have to cut costs by reducing its staff at some point. If that happens, there will be a lot of qualified members of the financial community seeking quality work.
In the past, it was not easy for unemployed financial professionals to find a good job. StreetID hopes to change that.
"We work with a number of the smaller broker-dealers on the Street, particularly in New York," said Jesse Marrus, founder of StreetID. "They are always going to be looking for talented people, particularly coming from a place like Knight."
Marrus said that there is a "parachute effect" where job seekers can "get to the StreetID platform, register for an account, and immediately be found by our broker-dealer clients that are looking for people with these exact skill sets."
If layoffs occur at Knight Capital, Marrus said that StreetID will be ready. However, he is very supportive of the company and still believes that there is a chance for it to pull through.
"I think the one thing that might save them is that it is a purely technical issue," Marrus said on Friday. "If somebody believes that this is still a viable company, they might step in and save them."
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