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 [email protected]
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