Knight Capital signed a $400 million deal to cover most of its losses from a trading glitch.
NEW YORK (CNNMoney) -- Knight Capital Group will live to see another trading day, but its investors are not pleased.
After suffering a massive loss from a trading glitch last week, Knight Capital (KCG) struck a deal with a group of investors who purchased a majority stake in the trading firm for $400 million.
Investors will receive 267 million shares of Knight, according to a document filed with the Securities and Exchange Commission on Monday. Ahead of this deal, Knight had roughly 90 million shares outstanding.
Knight Capital's stock dropped more than 30% in premarket trading on news of the deal. That's because the new investment will severely cut into the value of existing shareholders' stakes.
Knight lost about 60% of its value over a three-day period last week, despite a huge rally on Friday.
The firm lost $440 million after a trading software snafu on Aug. 1 that sent numerous erroneous orders in NYSE-listed securities into the market. Some 150 companies listed on the NYSE were affected.
Knight Capital plays a key role on Wall Street by acting as a middleman in the markets, completing investors' orders to buy and sell stocks.
The New York Stock Exchange (NYX) announced Monday morning that it temporarily reassigned custodial duties over nearly 700 stocks to Getco, another high speed trading firm.
Once the rescue deal is officially completed and approved, the New York Stock Exchange said it will hand these stocks back to Knight.
Last week, several clients of Knight suspended trading activity with the firm. But by Friday afternoon, several of those clients, including TD Ameritrade (AMTD) and Scottrade, had resumed trading with Knight. That helped lift shares of Knight by nearly 60% on Friday.
The company did not name the new investors in its SEC document. But according to news reports citing people with familiar with the matter, the group includes TD Ameritrade (AMTD), Blackstone Group (BX), Getco, Stifel Nicolaus (SF), Jefferies Group (JEF) and Stephens Inc.
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