Ken Griffin’s Citadel Securities sells $ 1.2 billion stake to Sequoia and Paradigm

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 IPO of one of the largest market makers 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 group best known for its early bets on tech 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, Citadel, and has grown into a major player in global markets in its own right. .

One of the main beneficiaries of the shift to high-speed trading, Citadel Securities acts as an intermediary between sellers and buyers of stocks, bonds and derivatives. He became the largest market maker for US stocks, handling about 27% of all US equity transactions, stealing market share from large-scale banks.

Citadel Securities chief executive Peng Zhao said the company plans to use the investment to expand more aggressively internationally and into new markets and asset classes. This includes the expansion of crypto, said Matt Huang, who co-founded Paradigm with Coinbase co-founder Fred Ehrsam.

Griffin has criticized cryptocurrencies in the past, describing them in October as “a jihadist call that we don’t believe in the dollar.” However, he added at the time: “Whatever the virtues of this product, which in my opinion are quite nebulous, will become very different in a world of competitive trading and competitive prices by market makers of foreground willing to do their best. ”

The investment also sets the stage for a future IPO, according to a person familiar with the situation.

Citadel Securities is the largest market maker for ordinary U.S. traders – accounting for about 37% of all retail exchanges – paying various brokerage firms for the right to process their orders. The Robinhood trading platform has used this “order payment flow” to offer its clients commission-free trades, helping usher in the era of free trade in the United States in recent years.

Citadel Securities’ prowess has sparked the envy of other parts of Wall Street and increased attention from regulators and politicians. He was uncomfortable in the public eye last year during the market turmoil surrounding the trading of GameStop and other memes stocks.

The company has been blamed by Redditors for Robinhood’s decision to restrict trade in GameStop at the height of the frenzy, and some of them have argued that the company is profiting from the trade at their expense.

Griffin was called to testify before the House of Representatives financial services committee in February 2021 following the GameStop frenzy. He stood up for his companies and said he was convinced that the “incredibly positive impact” of Citadel and Citadel Securities would shine through.

Griffin owns around 85% of Citadel Securities, which would estimate his stake in the company at around $ 18 billion. At the end of last year, Griffin beat out a group of more than 17,000 retail traders at auction, buying a copy of the US Constitution for $ 43.2 million. In 2019 he paid £ 95million for a London house near Buckingham Palace.

Venture capital investing was first reported by the Wall Street Journal.

Additional reporting by Philip Stafford in London

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