Knight Capital Group, Inc.
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Knight Capital Group, Inc. Securities Settlement
The lawsuit was settled for additional disclosures in the proxy statement mailed to shareholders. The following is a summary of the proceedings in this lawsuit: ‘O n December 19, 2012, Knight and GETCO announced the execution of an agreement and plan of merger (the Merger Agreement) pursuant to which Knight and GETCO would merge and form a new publicly held holding company, and each outstanding share of Knight common stock would be eligible for conversion into either $3.75 in cash or one share of stock of the resulting company, subject to proration if the aggregate cash consideration elected exceeds $720 million, which would result in each Knight common share being eligible for conversion into $2.50 in cash and one-third of a share of the resulting company (the Transaction). On December 28, 2012, the Delaware Plaintiffs, each a stockholder of Knight, filed separate putative class action lawsuits in the Court against Defendants, captioned Dominique v. Thomas M. Joyce, et al., C.A. No. 8159-VCP, and McMillan v. Thomas M. Joyce, et al., C.A. No. 8163-VCP, challenging the Transaction. On December 31, 2012, Charles Bryan and James Ward, each alleging to be a stockholder of Knight, filed separate putative class action lawsuits in New Jersey Superior Court against, among others, Defendants, challenging the Transaction (the New Jersey Stockholder Actions). The New Jersey Stockholder Actions are captioned Bryan v. Knight Capital Group, Inc., C.A. No. HUD-C-1-13, and Ward v. Knight Capital Group, Inc., C.A. No. HUD-C-3-13. On January 15, 2013, the New York Plaintiff, a stockholder of Knight, filed the New York Stockholder Action challenging, among other things, the Transaction. The New York Stockholder Action also asserted derivative claims against Knight board serving as of August 1, 2012 concerning certain trading losses sustained by Knight in connection with a technology issue experienced on August 1, 2012. On January 31, 2013, the Court consolidated the actions pending in Delaware into the Delaware Stockholder Action; appointed Levi & Korsinsky, LLP and Rigrodsky & Long, P.A. as Co-Lead Counsel for the Delaware Plaintiffs; and ordered that the actions thereafter proceed under the caption In re Knight Capital Group, Inc. Shareholder Litigation, Consolidated C.A. No. 8159-VCP. On February 12, 2013, Knight and GETCO filed a preliminary registration statement on Form S-4 with the United States Securities and Exchange Commission (the SEC) under the issuer name Knight Holdco, Inc., which, among other things, summarized the Merger Agreement, described the events leading up to the execution of the Merger Agreement, and summarized the valuation analyses conducted by Sandler ONeill + Partners L.P. (Sandler), the financial advisor to the Knight board of directors. On March 5, 2013, the Delaware Plaintiffs filed an amended complaint (the Delaware Complaint) and filed motions for a preliminary injunction and for expedited discovery. The Delaware Complaint alleges that, among other things, the Individual Defendants breached their fiduciary duties owed to the public stockholders of Knight in connection with the Transaction and that GETCO and GA-GTCO, LLC aided and abetted these alleged breaches. On March 14, 2013, the New York Plaintiff filed an amended complaint (the New York Complaint). The New York Complaint continued to assert derivative claims relating to the August 2012 trading losses and also alleges that, among other things, the Individual Defendants breached their fiduciary duties owed to the public stockholders of Knight in connection with the Transaction and that GETCO, General Atlantic LLC, and GA-GTCO, LLC aided and abetted these alleged breaches. On March 21, 2013, the New York Plaintiff moved by order to show cause for expedited proceedings. The New York Court scheduled a hearing on the New York Plaintiff motion for April 4, 2013. On March 28, 2013, the New York Plaintiff reached an agreement with Defendants with respect to the matters raised in his motion for expedited proceedings, which resulted in the New York Plaintiff moving to withdraw his motion on March 29, 2013 and agreeing to receive the documents being produced by Defendants in the Delaware Stockholder Action thereafter, as well as attend and ask non-duplicative questions at the depositions being taken in the Delaware Stockholder Action. The New York Court approved the New York Plaintiff motion to withdraw his motion for expedited proceedings on April 9, 2013. On March 28, 2013, the Court entered a stipulation and order governing the production and exchange of confidential and highly confidential discovery materials among the Delaware Plaintiffs and Defendants. Following a motion by Knight to dismiss or, in the alternative, stay the New Jersey Stockholder Actions made on February 20, 2013, the New Jersey Superior Court stayed for all purposes the New Jersey Stockholder Actions on March 28, 2013. On April 1, 2013, the Delaware Plaintiffs served Defendants with document requests and, thereafter, the Delaware Plaintiffs and Knight negotiated expedited discovery parameters concerning, among other things, email search terms, document custodians, and deponents. I n expedited discovery, Defendants, on a confidential basis, produced, and the Delaware and New York Plaintiffs reviewed, tens of thousands of pages of documents, including electronic communications, board meeting minutes, and board presentations. A lso in expedited discovery, Co-Lead Counsel for the Delaware Plaintiffs conducted two (2) depositions, including the deposition of Thomas M. Joyce, the Chairman and CEO of Knight, and the deposition of Brian Sterling, a principal and co-head of Investment Banking at Sandler, and these depositions were attended by counsel for the New York Plaintiff, who also questioned the witnesses. T he Delaware and New York Plaintiffs have consulted with their respective financial experts in connection with their review and analysis of the facts and claims at issue in the Stockholder Actions. O n April 15, 2013, Knight and GETCO filed a first amendment to their preliminary registration statement on Form S-4 with the SEC under the issuer name Knight Holdco, Inc., which, among other things, summarized the Merger Agreement, described the events leading up to the execution of the Merger Agreement, and summarized the valuation analyses conducted by Sandler. O n May 9, 2013, the Court entered a scheduling order that set a hearing for the Delaware Plaintiffs motion for a preliminary injunction for June 5, 2013. O n May 13, 2013, May 23, 2014, and May 24, 2013, respectively, Knight and GETCO filed a second, third, and fourth amendment to their preliminary registration statement on Form S-4 with the SEC under the issuer name KCG Holdings, Inc.,†each of which, among other things, summarized the Merger Agreement, described the events leading up to the execution of the Merger Agreement, and summarized the valuation analyses conducted by Sandler. O n May 22, 2013, the Court entered a further revised scheduling order that set the hearing for the Delaware Plaintiffs motion for a preliminary injunction for June 17, 2013. O n May 24, 2013, the Delaware Plaintiffs filed their opening papers in support of their motion for a preliminary injunction. O n May 28, 2013, Knight and GETCO filed their joint prospectus on Form 424B3 with the SEC under the issuer name KCG Holdings, Inc.,†which, among other things, summarized the Merger Agreement, provides an account of the events leading up to the execution of the Merger Agreement, and provided a summary of the valuation analyses conducted by Sandler. O n June 10, 2013, the Parties entered into a Memorandum of Understanding (the MOU), which reflected the Parties agreement-in-principle to settle the Stockholder Actions (the Settlement). The MOU provided, among other things, that Knight would provide certain supplemental disclosures sought by Plaintiffs in the Stockholder Actions in a filing with the SEC on Form 8-K, to be filed promptly following execution of the MOU (the Supplemental Disclosures) and would revise certain provisions in its Risk Committee charter as well as certain provisions in the Risk Committee charter of the resulting company KCG Holdings, Inc. (KCG). Without admitting any wrongdoing, Defendants acknowledged that the pendency of the Stockholder Actions were the sole cause of the dissemination of the Supplemental Disclosures and the revisions to the Risk Committee charters of the Company and KCG. O n June 13, 2013, the Parties informed the Court of their agreement-in-principle to settle the Stockholder Actions pursuant to the terms in the MOU. O n June 14, 2013, Knight filed a Form 8-K with the SEC containing the Supplemental Disclosures. A t the June 25, 2013 special meeting of the Knight stockholders, holders of 90.39% of Knight shares (representing over 99% of the shares voted) voted to approve the Merger Agreement.’