Extreme Investor Network presents: B. Riley Financial Inc. Halts Dividend, Warns of Losses Due to Stake in Franchise Group Inc.
In recent news, B. Riley Financial Inc. has made the decision to suspend its dividend and brace for losses as a result of a write-down in its stake in Franchise Group Inc., a troubled US retail business. This boutique investment bank, based in Los Angeles, announced losses for the quarter ended June 30 could be anywhere between $435 million and $475 million. This stark contrast from the $46 million profit reported a year ago has had a significant impact on the bank’s shares, which plummeted in early trading.
The majority of this loss is attributed to a markdown related to B. Riley’s investment in Franchise Group, with an estimated write-down ranging from $330 million to $370 million. This continues a downward trend for the bank, with its shares already having fallen more than 80% since the conclusion of 2021 due to concerns surrounding its investments.
B. Riley’s involvement with Franchise Group began a year ago when it helped then-CEO Brian Kahn take control of the company, resulting in the bank acquiring a 31% stake. However, this partnership has faced challenges stemming from allegations surrounding Kahn’s previous ties to the collapse of a hedge fund called Prophecy Asset Management.
Despite the turmoil, Bryant Riley, the founder of B. Riley, affirms that the allegations against Kahn are unrelated to Franchise Group or B. Riley, but have hindered the company’s progression in executing its business strategies. Short sellers have capitalized on this uncertainty, betting against B. Riley due to these problematic acquisitions and connections with FRG and Kahn.
As a consequence of these events, B. Riley is expected to file a notice with the US Securities and Exchange Commission regarding a delay in publishing its quarterly 10-Q filing for the period. This marks the third instance this year where the bank will miss a regulatory report deadline after failing to file its annual report and first-quarter 10-Q filing in a timely manner.
Stay tuned as more updates on this developing story unfold.
–With assistance from Jenny Surane.
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