B. Riley stock extends losses after bank delays quarterly report By Reuters

By Manya Saini, Niket Nishant and Saeed Azhar

(Reuters) -B. Riley Financial’s shares fell 4% in morning trading on Tuesday after the investment bank disclosed a delay in filing its quarterly report with the U.S. Securities and Exchange Commission, adding to a sharp plunge triggered by expectations of a second-quarter loss.

The company’s stock plunged 52% on Monday and its market value halved to roughly $247 million after the bank said it expects to report, on a preliminary basis, a loss in the range of $435 million to $475 million for the three months ended June 30.

This compares with a second-quarter profit of $44 million, or $1.55 per share, a year ago.  

“Our second quarter results were negatively impacted by non-cash losses, the overwhelming majority of which relate to performance of our investment in Franchise Group (NASDAQ:) and our Vintage Capital loan receivable,” CEO Bryant Riley said in a statement. 

He added the write-down was driven by confluence of recent events, including the impact of a meaningfully weaker consumer spending environment on the Vitamin Shoppe-parent’s businesses and its investments. 

B. Riley expects to take a $330 million to $370 million non-cash markdown related to these investments in the quarter. 

REGULATORY HEADWINDS

In July, the company and its CEO received subpoenas from the SEC, primarily related to the bank’s dealings with Franchise Group’s former CEO, Brian Kahn.

“We are confident that the SEC will reach the same conclusion that our own internal investigation, with the assistance of two separate law firms, did – that we had no involvement with or knowledge of any alleged misconduct concerning Brian Kahn or his affiliates,” B. Riley said on a call on Monday.

In November, Bloomberg News reported that Kahn was a co-conspirator in a securities fraud involving Prophecy Asset Management. Kahn has denied the allegations made in the report, saying he never knew that Prophecy Asset was allegedly defrauding investors.

This marks the third time the bank has delayed its reports with the SEC this year. It said the hold-up was due to delays it has experienced in finalizing the valuations of certain loans and investments.

The news outlet also reported on Monday that the U.S. SEC is assessing whether the Los Angeles-based boutique investment bank adequately disclosed the risks embedded in some of its assets, citing people familiar with the matter.

B. Riley led the financing for the management-led buyout of Franchise in 2023. Japanese investment bank Nomura’s U.S. arm, which has a credit deal with B. Riley, had previously granted it extensions to file its annual financial reports with the markets regulator.

The Franchise deal was partly funded by a $600 million loan that Nomura arranged for B. Riley, according to a report from Bloomberg News.

An external investigation and an internal review earlier this year cleared B. Riley of any wrongdoing.

However, the allegations allowed B. Riley’s critics – including Wolfpack Research, which shorted it last year – to renew their attacks on the company.

The bank’s stock is down roughly 61% so far this year. Short interest has surged to 40.6%, according to LSEG data.