Hedge fund billionaire Ken Griffin has sold a $1.2 billion stake in Citadel Securities to venture capitalists Sequoia and Paradigm, paving the way for an initial public offering of one of his companies. largest market maker in the world.
The deal, which values the trading company at around $22 billion, marks a rare foray into the financial sector for Sequoia, the Silicon Valley conglomerate known for its early bets on startups. technology companies like Apple and Google.
This is the first outside investment in Citadel Securities, which was founded in 2001 as a separate entity from Griffin’s $43 billion hedge fund, and has emerged as a major player in the global market in its own right.
One of the biggest beneficiaries of the move to high-speed trading, Citadel Securities acts as an intermediary between sellers and buyers of stocks, bonds and derivatives. It has grown to become the largest market maker for US stocks, processing about 27% of all US stock trades, by stealing market share from the big banks.
Citadel Securities CEO Peng Zhao said the company plans to use the investment to expand more aggressively internationally, as well as into new markets and asset classes. This includes an expansion into crypto, said Matt Huang, who co-founded Paradigm with Coinbase co-founder Fred Ehrsam.
Griffin has been critical of cryptocurrencies in the past, describe them in October was “a call from the jihadists that we don’t believe in the dollar”. However, he added at the time: “Whatever advantages that product has, which I think is quite illusory, will be very different in a world of competitive exchange and competitive pricing. by tier one market makers willing to give their best. . ”
The investment also prepares the ground for a future IPO, according to a person familiar with the situation.
Citadel Securities is the largest market maker for typical American traders – accounting for about 37% of all retail trade – paying various brokers for the power to process their orders. surname. Trading platform Robinhood has used this “pay for order” to offer clients commission-free trading, helping usher in the era of free trade in the US in recent years.
The strength of the Citadel Securities Company drew envy from other parts of Wall Street, and increased attention from regulators and politicians. It was annoyingly brought to the public stage last year during volatile market times surrounding trading on GameStop and other meme stocks.
The company was blamed by Redditors for Robinhood’s decision to cut trading in GameStop at the height of the frenzy, and some of them argued that the company benefited from trading at their expense.
Griffin was called to testify before the House financial services committee in February 2021 in the wake of the GameStop craze. He defended his business and said he was confident that the “extremely positive impact” of Citadel Securities and City Joint Stock Company would shine through.
Griffin owns about 85% of Citadel Securities, which would value his stake in the business at about $18 billion. Late last year, Griffin beat a group of more than 17,000 retail traders in an auction, purchasing a copy of the US Constitution for $43.2 million. In 2019 he paid £95m for a House in London near Buckingham Palace.
Venture capital was first reported by the Wall Street Journal.
Additional reporting by Philip Stafford in London
