Why did Citadel Securities raise so much money after making a new $ 22 billion investment?

What is the business model of Citadel Securities, a world-renowned developer?

According to the Wall Street Journal on January 11, world-renowned venture capital firm Citadel Securities has completed a $ 1.15 billion funding round valued at $ 22 billion led by Sequoia Capital and the company. Paradigm cryptocurrency investment. . Alfred Lin, partner of Sequoia Capital, will also join the board of directors of Citadel Securities.

This is Citadel Securities' first outside investment to commemorate the world's first super unicorn in 2022. This investment will help the company continue its global expansion and announce an IPO. . What is the meaning of this business economic model?

Left-handed hedge fund, right-handed market txiag

Citadel is a real estate management company and Citadel Securities is a brokerage firm of two different companies, but both are managed by a man named Ken Griffin.

In 1990 Griffin acquired Wellington Financial Group hedge fund with seed capital of $ 4.6 million. In 1994, Wellington Financial Group changed its name to Citadel, which means "name" in Chinese. In just eight years since its inception, Citadel's assets have grown to over $ 2 billion.

Since its inception, the Citadel has grown rapidly, gaining public favor for its most overlooked or unpopular assets. Unlike many other key investors, Griffin was generally silent on his investment strategies. With the support of mathematical models, its risk increases. During the financial crisis, Citadel's leverage ratio rose to 7: 1, or $ 7 in dollar-denominated assets, but fell to 4: 1 in mid-2011. , but still high.

By the end of 2008, Citadel's biggest investment had fallen by 55%. However, it recovered in 2009 with a 62% return. Unlike other funds, Citadel was "relatively expanding" after a financial crisis led by Griffin. In the 18 months starting in early 2014, Citadel's assets under management have raised $ 10 billion, from $ 16 billion to $ 26 billion, thanks to a 29% increase in key revenues.

As of September 2021, the Citadel's assets stood at $38 billion. Wellington, Citadel's flagship fund, rose 7.8% during the month of changes in the US economy in September.

Founded in 2001, Citadel Securities is one of the largest corporations in the United States. According to the company's website, Citadel Securities' automated stock trading platform operates about 27% of US stock market volume, including over 11,000 US-listed securities and over 16,000 over-the-counter securities. will.

Citadel Securities, which has been on the stock market since 2002, is not gone yet, but when the “sales war” erupted last year, investors This copy was made before the bottom. , and find out more.

As early as 2021, the US trader developed a long-term relationship with the social platform, aggregating higher prices on products such as GameStop, leading to a sharp drop in short sales. Restrictions on the sale of goods are affected - only for sale, not for purchase.

In this regard, Citadel Securities acquired most of Robinhood's business, and Citadel invested $ 2 billion in Melvin Capital, the leading near-term GameStop retailer, suggesting that Citadel Securities could work for short sellers. , causing turmoil for traders.

Subsequent SEC investigations revealed that this expectation was not true, but Citadel Securities was also brought to the fore after the incident. The operations and operations of Citadel Securities were not seriously affected by the incident. Citadel Securities plays a key role in the trading of the entire stock market and can benefit from the GME craze. The more you do, the more “crumbs” you get.

Citadel Securities, which became a market color due to the “sell war,” received investment from Sequoia Capital and cryptocurrency investment firm Paradigm for the first time since its inception. Significant financial security also means Citadel Securities will expand its rating metrics.

Are you considering your next IPO?

Citadel Securities offers stock trading and trading contracts to a number of companies and investors, and its affiliates serve more than 1,600 clients. , including the world's largest financial institutions and financial institutions. It operates in 50 countries around the world with 12 offices in North America, Asia-Pacific and the Middle East, including Shanghai and Hong Kong SAR.

Following this external investment, Citadel Securities was valued at $ 22 billion. Griffin's fortune could rise from $ 6.5 billion to $ 27.6 billion, according to the Bloomberg Billionaires Index.

According to the official Citadel Securities website, Citadel Securities is a global company designed to reduce trading costs and meet the needs of wealthy regulators, banks, lenders and investors, retailers, finance, government agencies, and pension plans. Foreign media reported that Citadel Securities could hold up to 40% of the US retail volume.

The benefits of Citadel Securities often depend on the difference between the bid price and the ask price, and while the price difference per unit is only a few pennies, that is a lot. Citadel Securities typically buys trades at low prices or even without the payouts preferred by retail investors, such as stock broker Robinhood and e-commerce platform Charles Schwab.

In 2015, The Wall Street Journal reported that Citadel was going public, and in 2019 Blackstone was in talks with Citadel Securities to acquire part of Citadel, a hedge that governs the term of the $5 billion and $7 billion company. dollars. Success has been recorded since then, and it is not known that Citadel Securities at that time suddenly attracted public attention and accepted outside investment, perhaps considering an IPO.

It should be noted that Paradigm, one of the few cryptocurrency firms invested by the Yale University Endowment Fund, is also one of them. One of the investors, Paradigm co-founder and partner Huang Gongyu, not only praised Citadel Securities' technology, but also expressed hope that Citadel Securities will join the new fund, including cryptocurrencies.

It's only promising at the moment, but Citadel Securities' business model could also alter some of the volatility as a result of this grant. As a joint venture between key securities firms, it has become a burden on Citadel Securities as it is overseen by regulators.

It is not yet clear how Citadel Securities will enter the cryptocurrency market, but the addition of Citadel Securities could change the trading ecosystem.