Citadel Securities surprised the investment world this morning when the global market maker announced it had accepted external funding for the first time ever. The $1.15 billion in external funds came from Sequoia Capital and Paradigm. As a result, the two companies will now own a minority stake in Citadel. Further, the external funding values Citadel at $22 billion.
Venture capital fund Sequoia Capital led the funding round. Additionally, fans of crypto are ecstatic that Paradigm participated since the investment firm primarily invests in crypto and Web 3.0 opportunities. This may hint that Citadel has plans to be involved with crypto and blockchain transactions in the future. Citadel Securities CEO Peng Zhao added the following:
“As technological innovation in financial markets becomes only more important, we see enormous opportunities to meet the needs of our clients across more markets and more products.”
Adding to the news is Citadel’s majority owner, Ken Griffin. Recently, Griffin outbid the ConstitutionDAO for a rare print of the U.S. Constitution. The decentralized autonomous organization (DAO) consisted of over 17,000 donors who collectively pooled an incredible $49.5 million worth of Ethereum (CCC:ETH-USD) in an attempt to buy the famed document. Griffin’s winning bid of $43.2 million was below what the ConstitutionDAO had collected. However, the DAO also had to factor in costs related to insurance, auction fees, storage and more, making Griffin the victor.
So, what else do you need to know with headlines about Citadel making the rounds today? Let’s jump right in.
Citadel Securities Raises $1.15 Billion: 8 Things to Know
- As a result of the funding, Sequoia partner Alfred Lin will join the board of Citadel Securities.
- Rumors are also circulating that Citadel may be eyeing an initial public offering (IPO). However, the company has not yet commented on this rumor.
- Citadel enjoyed a jump in retail trading last year amid the GameStop (NYSE:GME) fiasco. For example, Citadel handled 29% of the trading volume in GME stock when it crashed in early 2021.
- The market maker accounts for 40 shares out of every 100 shares traded by individual U.S. investors. Citadel is the largest U.S. retail market maker.
- Citadel makes money by keeping the difference between the bid and the ask price. While the difference is usually only a few cents, the cents add up when millions of orders are transacted every day.
- In addition, Citadel purchases order flow for several million dollars from popular brokerages like Charles Schwab (NYSE:SCHW) and Robinhood (NASDAQ:HOOD). By purchasing order flow, Citadel will have the opportunity to execute trades and collect the difference between the bid and ask price.
- Citadel has a duty to provide customers with the “best execution” in regards to prices.
- Finally, payments for order flow is seen as a controversial practice. The concept is banned in foreign markets like the United Kingdom, Australia and Canada.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.