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The Shorting of Frauds, Overhyped and Bankrupt Stocks Journal
- Thread starter Daal
- Start date
So how much is KCG is worth now?
I believe a better question is how much will the market value KCG next week. Its a guessing game but using information and market experience these guesses can have positive expectancy
Company was worth $1B before debacle, so we know where the ceiling is, its extremely likely it will be bellow the ceiling due a number of factor but the main ones are
-Algo trading is more levered than thought. Company had $1B in tangible equity and 1 bug led to a $15B stock purchase, this calls for a lower multiple
-Shock factor, for a period of time stock will trade at a lower multiple simply because people will be selling as their thesis was wrong(This is similar to how spin offs tend to have their shares depressed as people sell because they have no intention of owning the spin off)
-Conversion sellers at any price above $1.5 could depress stock
-Regulatory and legal action against the company now is possible
The first 2 are the most solid, I'm fairly sure they will play a role, the third one will at least play some factor, the last one is more uncertain. It might or might not be factored in by the investors
Over all with $100M in earnings(And KCG earnings was NOT on track to be that this year even before the debacle, it was going to be lower) a decent valuation guess would be $700M
This would be about $1.9 per share with the likely surprises coming to the downside
I believe a better question is how much will the market value KCG next week. Its a guessing game but using information and market experience these guesses can have positive expectancy
Company was worth $1B before debacle, so we know where the ceiling is, its extremely likely it will be bellow the ceiling due a number of factor but the main ones are
-Algo trading is more levered than thought. Company had $1B in tangible equity and 1 bug led to a $15B stock purchase, this calls for a lower multiple
-Shock factor, for a period of time stock will trade at a lower multiple simply because people will be selling as their thesis was wrong(This is similar to how spin offs tend to have their shares depressed as people sell because they have no intention of owning the spin off)
-Conversion sellers at any price above $1.5 could depress stock
-Regulatory and legal action against the company now is possible
The first 2 are the most solid, I'm fairly sure they will play a role, the third one will at least play some factor, the last one is more uncertain. It might or might not be factored in by the investors
Over all with $100M in earnings(And KCG earnings was NOT on track to be that this year even before the debacle, it was going to be lower) a decent valuation guess would be $700M
This would be about $1.9 per share with the likely surprises coming to the downside
Quote from Daal:
So how much is KCG is worth now?
I believe a better question is how much will the market value KCG next week. Its a guessing game but using information and market experience these guesses can have positive expectancy
Over all with $100M in earnings(And KCG earnings was NOT on track to be that this year even before the debacle, it was going to be lower) a decent valuation guess would be $700M
This would be about $1.9 per share with the likely surprises coming to the downside
$700 million sounds reasonable, or even bit more. The 2% coupon on the bond means that there is very little additional interest expense. Analysts can now value the company on the basis of future profitability.
We could use $2 per share as a round number.
364 million shares * 2 = $728 million which sounds about right.
Maybe as high as $2.50 (364 * 2.50 = 910 million) after 9.30am.
Obviously at $2.85-ish it still looks a bit high, at least to this observer.
Quote from m22au:
$700 million sounds reasonable, or even bit more. The 2% coupon on the bond means that there is very little additional interest expense. Analysts can now value the company on the basis of future profitability.
We could use $2 per share as a round number.
364 million shares * 2 = $728 million which sounds about right.
Maybe as high as $2.50 (364 * 2.50 = 910 million) after 9.30am.
Obviously at $2.85-ish it still looks a bit high, at least to this observer.
Last 2 times there was bad news on the stock, it sold off the whole day and closed at lows
Quote from m22au:
$700 million sounds reasonable, or even bit more. The 2% coupon on the bond means that there is very little additional interest expense. Analysts can now value the company on the basis of future profitability.
We could use $2 per share as a round number.
364 million shares * 2 = $728 million which sounds about right.
Maybe as high as $2.50 (364 * 2.50 = 910 million) after 9.30am.
Obviously at $2.85-ish it still looks a bit high, at least to this observer.
I think the right number of shares outstanding might be 355. Option compensation might not be exercisable anymore
Basically it was a secondary. The convertible was probably for accounting reasons.
Looks like I was wrong. Hoping I can get out of my position without too much pain.
Looks like I was wrong. Hoping I can get out of my position without too much pain.
Quote from Daal:
Last 2 times there was bad news on the stock, it sold off the whole day and closed at lows
Yeah I would guess that it has some intraday support at 2.27 (Thursday low), which equates to a market cap of
364 * 2.27 = 826 million
or using 355 million shares as the count
355 * 2.27 = 805 million
Still a bit high, but a reasonable number.
8-K filled today
http://www.knight.com/investorRelations/secFiling.asp
Investors have no obligation to convert preferred. They might way to suck some dividends out of the company before they convert
http://www.knight.com/investorRelations/secFiling.asp
Investors have no obligation to convert preferred. They might way to suck some dividends out of the company before they convert
"Going Concern
On August 1, 2012, at the open of trading at the NYSE, the Company experienced a technology issue related to its installation of trading software
which resulted in the Company sending numerous erroneous orders in NYSE-listed securities into the market. The Company has traded out of its entire
erroneous trade position, which resulted in a realized pre-tax loss to the Company of approximately $440 million. This trading software was removed from the
Company's trading systems on August 1, 2012.
As a result of this issue relating to the trading software and the resultant loss, the Company experienced reduced order flow and liquidity pressures, and
its capital base was severely impacted. In view of the impact to the Company's capital base and the resultant loss of customer and counterparty confidence,
there is substantial doubt about the Company's ability to continue as a going concern. In light of this development, the Company, after evaluating and
pursuing various strategic alternatives, entered into a securities purchase agreement with several investors on August 5, 2012. Upon the closing of the
transactions contemplated by that securities purchase agreement, which is anticipated to occur on August 6, 2012, the investors will purchase an aggregate of
$400.0 million of convertible preferred stock. Consequently, the accompanying Consolidated Financial Statements have been prepared assuming that the
Company will continue as a going concern and do not include any adjustments that might have resulted from the outcome of this situation."
$1B is much too high for a company with Going Concern sections in its SEC fillings
On August 1, 2012, at the open of trading at the NYSE, the Company experienced a technology issue related to its installation of trading software
which resulted in the Company sending numerous erroneous orders in NYSE-listed securities into the market. The Company has traded out of its entire
erroneous trade position, which resulted in a realized pre-tax loss to the Company of approximately $440 million. This trading software was removed from the
Company's trading systems on August 1, 2012.
As a result of this issue relating to the trading software and the resultant loss, the Company experienced reduced order flow and liquidity pressures, and
its capital base was severely impacted. In view of the impact to the Company's capital base and the resultant loss of customer and counterparty confidence,
there is substantial doubt about the Company's ability to continue as a going concern. In light of this development, the Company, after evaluating and
pursuing various strategic alternatives, entered into a securities purchase agreement with several investors on August 5, 2012. Upon the closing of the
transactions contemplated by that securities purchase agreement, which is anticipated to occur on August 6, 2012, the investors will purchase an aggregate of
$400.0 million of convertible preferred stock. Consequently, the accompanying Consolidated Financial Statements have been prepared assuming that the
Company will continue as a going concern and do not include any adjustments that might have resulted from the outcome of this situation."
$1B is much too high for a company with Going Concern sections in its SEC fillings