B. Riley stock extends losses after bank delays quarterly report

(Reuters) -B. Riley Financial’s shares fell 11% in premarket 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 the 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

Monday marked the third time the bank has delayed its quarterly reports with the SEC this year.

B. Riley said the hold-up was due to delays it has experienced in finalizing the valuations of certain loans and investments.

Bloomberg News also reported on Monday that the bank faces a widening U.S. investigation into whether it gave investors an accurate picture of its financial health amid a string of losses and a sagging stock price.

The U.S. SEC is assessing whether the Los Angeles-based boutique investment bank adequately disclosed the risks embedded in some of its assets, the report added, citing people familiar with the matter.

A spokesperson for B. Riley did not immediately respond to a request for comment.

B. Riley’s investment in Franchise Group, which was taken private in a management-led buyout in 2023, had invited scrutiny.

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.

In November, Bloomberg News reported that Franchise Group’s former CEO, Brian Kahn, was a co-conspirator in a securities fraud involving Prophecy Asset Management.

Kahn denied the allegations made in the report, saying he never knew that Prophecy Asset was allegedly defrauding investors.

An external investigation and an internal review earlier this year also 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.