Knight Survives While Shareholders Pay (Update 1)

Updated with Knight Capital Group's announcement and early market action.

NEW YORK (TheStreet) -- Shares of Knight Capital Group (KCG) were down 26% in early trading on Monday, to $3.00, after the company secured $400 million in financing.

Knight Capital said in a Securities and Exchange Commission filing that an unnamed group of investors had "agreed to purchase an aggregate of $400 million of 2% convertible preferred stock," which "will be convertible into approximately 267 million shares of common stock of the Company."

That means the new investors will end up owning roughly 70% of Knight Capital's common shares, at a price of $1.50 a share.

The company later announced that the investment deal had been completed, and that the new financing -- provided by Jefferies Group (JEF) , Blackstone (BX) , Getco, Stephens, Stifel Financial (SF) and TD Ameritrade (AMTD) -- would "allow Knight to resume normal operations immediately."

Knight Capital also said it had "committed to expand its Board of Directors by adding three new members."

Knight CEO Thomas Joyce said that "the array of participants in this capital infusion underscores Knight's critical role in the capital markets. With our financial position strengthened and liquidity restored, we will continue to provide clients with trading in a broad range of securities, high-quality execution and outstanding client service."

Shares of the Jersey City, N.J., market maker and facilitator of electronic transactions for wholesale trading clients announced dropped 63% on Thursday, after Knight Capital announced a pretax loss of $440 million, after glitches in its trading software on Wednesday "sent into the market a ton of orders, all erroneous, so we ended up with a large error position which we had to sort through the balance of the day," according to Knight Capital CEO Thomas Joyce, who was interviewed on Bloomberg TV.

After seeing its shares drop 33% last Wednesday after an early trading glitch, followed by a 63% plunge on Thursday, after announcing a pretax loss of $440 million from its efforts close-out its erroneous trades, Knight Capital's shares bounced back 57% on Friday, to close at $4.05, after the company secured a credit line allowing it to continue operating for another day.