Charlie Gasparino: Blackstone Was in Talks to Buy Knight Capital Before Trading Disaster
Fox Business Network's Charlie Gasparino reported that private equity firm Blackstone (NYSE: BX) had been in talks for six months to take Knight Capital (NYSE: KCG) private prior to last week's disastrous trading glitch. A Knight Capital rogue algorithm caused chaos at the opening of trading last Wednesday in around 150 NYSE-traded stocks.
Knight's computer program was buying and selling stocks at irrational prices for nearly 45 minutes, costing the company $440 million in losses.
According to Gasparino's report, Blackstone conducted in-depth due diligence on Knight and was prepared to pay $1.2 billion for the company.
The timing of the glitch was extremely fortunate for Blackstone, as the firm may have taken a big hit if it had purchased Knight prior to the algo error. Despite the close call, Blackstone is participating in a $400 million equity financing which Knight Capital announced on Monday. The deal will help the trading firm avoid bankruptcy.
Gasparino also reported that Jefferies Group (NYSE: JEF), another firm participating in the financing, used Blackstone's due diligence in deciding to bail out Knight Capital.
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