B. Riley Financial Shares Plunge 10% Amid SEC Probe Report
B. Riley Financial (NASDAQ:RILY) experienced a 10% drop in its stock price intra-day today amid reports that the Securities and Exchange Commission (SEC) is investigating the firm's connections with a client involved in securities fraud.
Bloomberg News reported that the SEC is looking into B. Riley's relationship with Brian Kahn, who is implicated as an unnamed co-conspirator in a Department of Justice (DoJ) case. This case relates to the 2020 collapse of the Prophecy Asset Management hedge fund. However, B Riley has stated that it has not received any official communication from the SEC regarding this investigation.
A spokesperson for B. Riley, in response to Bloomberg News, asserted the company's readiness to cooperate with any SEC inquiries, as it has done previously with regulatory matters. The spokesperson also expressed openness to an investigation into the alleged destructive tactics employed by short sellers against B. Riley. These tactics reportedly include coordinated options trading without disclosure obligations and personal attacks on the firm's employees for profit motives.
The SEC's investigation is said to be particularly focused on Kahn's role in the acquisition of retail company Franchise Group Inc., a transaction that B Riley facilitated last year with partial financing from Nomura. It is believed that some of Kahn's assets were used as collateral in this deal.
| Symbol | Price | %chg |
|---|---|---|
| BAJAJFINSV.NS | 1815.8 | 0 |
| BAJAJFINSV.BO | 1815.35 | 0 |
| ABCAPITAL.NS | 218.49 | 0 |
| ABCAPITAL.BO | 218.35 | 0 |
B. Riley Shares Surge 16% After Co-CEO Proposes to Buy Investment Bank Amid Struggles
In a regulatory filing on Friday, Bryant Riley, co-CEO of B. Riley Financial (NASDAQ:RILY), proposed to acquire the investment bank, sending the company’s shares soaring over 16% on Friday. The $7 per share offer represents a 39% premium to the stock's last closing price.
The move comes as B. Riley's stock has plummeted 70% this week, highlighting the significant challenges the Los Angeles-based financial services firm faces, particularly regarding its investment in Franchise Group (FRG), the parent company of Vitamin Shoppe.
Riley, the co-founder and largest shareholder of B. Riley, stated that the acquisition would only proceed with approval from a special committee of independent directors on the board. He emphasized that the current public company structure forces the bank to prioritize short-term objectives and devote undue attention to external stakeholders who may not share the company's long-term vision.
Earlier this week, B. Riley shares tumbled nearly 52% after it disclosed preliminary second-quarter results, including the suspension of its dividend and a projected net loss of $435 to $475 million for the quarter ending June 30. This equates to a loss of $14 to $15 per share.
The financial setback was largely attributed to non-cash losses tied to B. Riley's investment in Franchise Group and a loan receivable from Vintage Capital, which is collateralized by equity interests in FRG. Riley cited these investments as the primary factors behind the poor quarterly performance.
B. Riley Financial Shares Plummet 51% After Suspending Dividend and Reporting Significant Q2 Loss
Shares of B. Riley Financial (NASDAQ:RILY) took a dramatic plunge, dropping by 51% on Monday following the release of the company’s preliminary second-quarter results. The financial services firm disclosed a significant net loss for the quarter, along with the suspension of its dividend.
B. Riley Financial anticipates reporting a net loss between $435 million and $475 million, translating to a loss of $14 to $15 per share. The substantial losses are largely attributed to non-cash markdowns, with the company pointing to the underperformance of its investment in Franchise Group, Inc. (FRG) and its Vintage Capital loan receivable as major factors.
Chairman and Co-Chief Executive Officer Bryant Riley highlighted that the company's financial setbacks were primarily driven by its exposure to Franchise Group, as well as challenges related to the former CEO of FRG, Brian Kahn, whose alleged misconduct has further complicated the investment, despite the issues being unrelated to B. Riley or FRG itself.
B. Riley expects to recognize a non-cash markdown of approximately $330 million to $370 million tied to its investment in Freedom VCM, the parent entity of FRG, and the associated Vintage Capital loan receivable. Additionally, the company plans to record an impairment charge of $28 million, mainly due to goodwill associated with Targus, which has been negatively affected by shifting consumer spending patterns. Another $25 million charge is expected for a valuation allowance related to deferred income taxes for the quarter.
