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HFT M&A: Why KCG Holdings, Inc. Class A (KCG) and Virtu Financial Inc (VIRT) Shares Are Soaring

Shares of Virtu Financial Inc (NASDAQ:VIRT), and KCG Holdings, Inc. Class A (NYSE:KCG) have spiked by 7% and 11%, respectively, after the former agreed to buy the latter for $20 in cash per share, or around $1.4 billion. Virtu CEO Douglas Cifu said, ‘KCG fits perfectly with Virtu’s strategic priorities to apply our market making and technological expertise to customer wholesale order flow and expand Virtu’s growing agency execution business by offering clients a combination of Virtu and KCG’s superior algorithms and proprietary analytical tools. In addition, there is immediate opportunity for revenue growth and significant cost savings’.

Both boards have unanimously approved the deal, which is expected to close in Q3. Even though it is paying a premium, Virtu shares are up because management expects the deal to deliver 25% accretion to EPS with fully-phased cost savings and capital synergies.

What Does The Smart Money Sentiment Say?

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

According to our database of 742 elite funds, 13 and 14 had a bullish position in KCG Holdings, Inc. Class A (NYSE:KCG) and  Virtu Financial Inc (NASDAQ:VIRT) as of the most recent 13-F reporting period, respectively. Both numbers were unchanged from the end of Q3 to the end of Q4.

The Bottom Line

KCG Holdings, Inc. Class A (NYSE:KCG) and Virtu Financial Inc (NASDAQ:VIRT) have surged due to today’s M&A news.  For more reading, check out ‘10 Biggest Insider Trading Scandals Ever to Rock Companies‘.


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