B. Riley's stock rallies 26% after founder offers to buy rest of troubled bank for $7 a share

By Ciara Linnane

Bryant R. Riley's offer is roughly a 40% premium over the stock's closing price Thursday

B. Riley Financial Inc.'s stock rallied 26% on Friday after Bryant R. Riley, the founder, chairman, co-chief executive and largest shareholder of the troubled investment bank, made an offer to buy the stock he doesn't already own for $7 a share.

That is about a 40% premium over the stock's closing price Thursday of $5.04. The stock was trading at $50 about a year ago.

The move, which was disclosed in a regulatory filing, comes just days after the bank said it was suspending its dividend partly because of the fallout from a loan it provided to help the former chief executive of Franchise Group Inc. acquire that company last year.

The bank's debt offerings are also under pressure. B. Riley's exchange-traded 5% notes due in 2026 (RILYG), which have a $25 par value, were changing hands in late morning trading for $8.86, which was a 23% increase from the previous close.

The bank also said its second-quarter earnings have been hit by noncash losses. It expects to post a second-quarter loss of $14 to $15 a share, or $435 million to $475 million, for the quarter.

The company said it would file for a delay of its quarterly 10-Q report with the Securities and Exchange Commission because of the extra time needed to finalize valuations of some of its loans and investments, and it said it was "working diligently" to complete the work.

The company also disclosed that it had been subpoenaed by the SEC in July as part of the regulator's investigation of Brian Kahn, the former CEO of Franchise Group.

B. Riley Financial (RILY) said it was responding to the subpoenas and cooperating with the SEC. The news sent its stock to its lowest level in about a decade.

Reports of an SEC probe of Kahn and his alleged misconduct at hedge fund Prophecy Asset Management "have continued to create additional challenges for this investment, despite the fact that these allegations are unrelated to [Franchise Group] or B. Riley," the bank said.

Franchise Group's retail brands include Vitamin Shoppe, Pet Supplies Plus and furniture seller American Freight. It sold Sylvan Learning to Unleashed Brands earlier this year. It also sold Badcock Furniture to Conn's. In July, Conn's filed for bankruptcy.

Riley owns 22.6% of the bank's outstanding common stock. In a letter to the board, he said he would finance the deal to buy the rest of the shares with debt and possibly equity from third-party capital providers "with whom I have deep and longstanding relationships."

The company's outstanding bonds and preferred stock would continue to be publicly traded, he said.

-Ciara Linnane

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08-16-24 1136ET

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