Quote from Daal:
They earn $100M in a good year, normalized earnings is less than that. The multiple should also be lower due to the fact that you can wipe out years worth of earnings really quickly
Quote from Daal:
If KCG raises $400m at a discount to fridays close as CNBC indicates the investors will own at least 50% of the stock. If my thinking was correct they will get more like 75%+. 25% of a say $1B valuation the company had before will result in a $250M market cap, roughly a 40% decline in the stock price tomorrow
But $1B is too rich given the new information about the risks of the business, plus the longs who thought they company would be bought at premium have to liquidate. Decline should be 50%+. More if the dillution is bigger
Quote from m22au:
I would think that given Chapter 11 is likely if no deal is done, then investors can demand a 50% plus type discount. However that's just my guess and it really depends on how hard each side wants to push things. Negotiations get complicated and waste time if, as the CNBC article says, there are approx. 6 investors involved in the deal.
It also isn't just about the conversion price of the securities. The interest rate on the bond matters as well - if KCG is paying (for example) 10% a year on $400 million, then that's another $40 million expense each year.
Quote from Daal:
Very true, the interest costs decrease the value of the company for the folks without the convert bond. Citadel and KKR also walked out according to bloomberg. Its not looking good for the stock at all
Quote from m22au:
Agree that it looks bad Citadel and KKR walked out, but you would think the reason why TD Ameritrade is one of the investors is because AMTD gets some (not sure how much) rebate income from market-makers such as NITE.
AMTD (as a related business) is probably much more interested in doing a over-the-weekend deal than private equity. For all we know, ETFC, SCHW and IBKR could also be part of the investing group.
AMTD is probably more likely to pay more than $2.50 a share today than a private equity buyer.
Quote from newwurldmn:
Cnbc is reporting a 440mm convert with 6 investors including amtd. But details are light.
The fact that kkr and citadel bailed either is negative (things much worse) or positive (bidding more competitive than they are willing to pay)
Quote from newwurldmn:
Cnbc is reporting a 440mm convert with 6 investors including amtd. But details are light.
The fact that kkr and citadel bailed either is negative (things much worse) or positive (bidding more competitive than they are willing to pay)