B. Riley's Monday From Hell Sends Share's Plunging - 52% Over Bad FRG Investment and SEC Probe...

Well, it looks like Wall Street is crushing one of its own this morning as B. Riley executives (and investors) are sweating more than a Priest in a school with the stock experiencing its third worst plunge ever. Spoiler: The second was in April of this year. 

(Source: Market Watch)

In short. B. Riley experienced a Monday morning from hell yesterday, as the company announced it’s expecting a quarterly loss between $433M and $475M. The reason? Mostly due to a massive $330M-$370M write-down of their investment in the Franchise Group. You know, the company who buys up all the once-glorious-but-now-meh franchises? (hello, Vitamin Shoppe). 

(Source: Pinterest) 

Now with that said, B. Riley didn’t just invest here; they got in bed with them, and woke up the next morning to an investment so ugly it could legit trick or treat over the phone. The write down, including a massive loan backed by FRG equity that has gone sour, has put B. Riley’s exposure in the likes of betting on a horse that’s already limping before the race starts. No bueno…

(Source: Giphy)

To add insult to injury, this has forced B. Riley to suspend its next quarter dividends from its previous yield of 6%, basically pissing off investors who were looking for a nice justification for messing with a boutique investment bank in the first place. 

(Source: Barrons) 

Oh and I almost forgot, on the same day, FRG’s former CEO, Brian Kahn, is now the subject of several SEC investigations, where B. Riley’s dealings with Kahn are being put under the microscope. Which isn’t technically good for B. Riley at all considering, Khan’s resume includes a failed hedge fund and a co-founder who’s now singing like a canary to the feds. 

Of course, Bryant Riley insists that B. Riley had no involvement or knowledge of any alleged misconduct concerning Kahn. But when the SEC enters the chat, it’s rarely just a friendly “Hey how ya doin?”. Meaning, B. Riley is about as nervous as a 13 year old boy getting his browser history checked by his mom. 

(Source: Yahoo Finance) 

As expected, this had investors bolting for the exits yesterday, as B. Riley’s stock plummeted to  $8.15, a far cry from its former glory days when it was trading at a peak of $72 back in 2021. So as of now, over the past three years, B. Riley has lost nearly -81% of its stock valuation. 

(Source: Wall Street Journal) 

This also follows the company’s most recent earnings back in March where B. Riley reported an absolute bloodbath. With revenue plunging - 25.37% year over year, net income, net profit margin, and diluted EPS also followed suit as all three nosedived a bone crushing -386.59%, -435.29%, -484.19% year over year. 

So clearly, the company is falling in the sh*tter these days. But in terms of the investors involved aka blokes like you and I, what does the future look like for B. Riley?

(Source: Giphy) 

Well as of now, the paused dividend is being enforced to pay down some of its $2.16 billion in debt. Which is smart, however, they are delaying their SEC filings because, apparently, they’re still figuring out how deep this rabbit hole goes. 

Now B. Riley is trying to reassure investors, saying they’re cooperating with the SEC as they expect to be cleared of any wrongdoing. But until more details emerge, it looks like B. Riley is becoming the victim of playing stupid games and winning stupid prizes. 

(Source: Giphy) 

Which isn’t surprising because #1. They’re an investment bank and #2. The name of the company is the ultimate egotistical move as the founder named it after himself. So yeah there’s that. 

So in the end, only time will tell if B. Riley can weather this storm or not, but for now I’d stay clear of this trainwreck. Hell, even a “BTFD” (Buy The “F^&*cking Dip!) slogan doesn’t work for me on this one. 

At the time of this writing, B. Riley is down -3.85% on the day (down -67.,20% YTD). 

Stocks.News does not hold any positions in companies mentioned in the article.