B. Riley Financial, Inc. (referred to as B. Riley) is an American financial services company headquartered in

Los Angeles Los Angeles, often referred to by its initials L.A., is the List of municipalities in California, most populous city in the U.S. state of California, and the commercial, Financial District, Los Angeles, financial, and Culture of Los Angeles, ...

California California () is a U.S. state, state in the Western United States that lies on the West Coast of the United States, Pacific Coast. It borders Oregon to the north, Nevada and Arizona to the east, and shares Mexico–United States border, an ...

. The company is known for its

investment banking Investment banking is an advisory-based financial service for institutional investors, corporations, governments, and similar clients. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by und ...

services regarding small cap companies as well as

retail Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is the sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholes ...

liquidation Liquidation is the process in accounting by which a Company (law), company is brought to an end. The assets and property of the business are redistributed. When a firm has been liquidated, it is sometimes referred to as :wikt:wind up#Noun, w ...

services. It has also acquired several organizations and companies in recent years.

History

1997–2000: Early years

In 1997, Bryant Riley founded B. Riley & Co. as a stock-picking firm serving

institutional investor An institutional investor is an entity that pools money to purchase securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, government-linked ...

s by providing research on small companies. The firm was fined $5,000 that year by the

U.S. Securities and Exchange Commission The United States Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street crash of 1929. Its primary purpose is to enforce laws against market m ...

(SEC) for lax record-keeping.

2001–2020: Acquisitions and growth

Initially Riley did not want the firm being involved in investment banking due to

conflict of interest A conflict of interest (COI) is a situation in which a person or organization is involved in multiple wikt:interest#Noun, interests, financial or otherwise, and serving one interest could involve working against another. Typically, this relates t ...

issues. However, in July 2003, the firm acquired Friend & Co., a

boutique investment bank A boutique investment bank is an investment bank that specializes in at least one aspect of investment banking, generally corporate finance, although some banks' strengths are retail in nature, such as Charles Schwab. Of those involved in corpor ...

where Riley once worked. In 2012, B. Riley acquired Caris & Co., a stock research firm to increase its sales and trading business in the brokerage industry during a slowdown in the industry. In June 2014, B. Riley & Co. merged with appraisal and liquidation service provider, Great American Group to form B. Riley Financial, a company listed on the

OTC Bulletin Board The OTC (Over-The-Counter) Bulletin Board or OTCBB was a United States Financial quote, quotation medium operated by the Financial Industry Regulatory Authority (FINRA) for its subscribing members. FINRA closed the OTCBB on November 8, 2021. The ...

under the ticker "RILY". In July 2015, B. Riley was approved to be uplisted to the

Nasdaq The Nasdaq Stock Market (; National Association of Securities Dealers Automated Quotations) is an American stock exchange based in New York City. It is the most active stock trading venue in the U.S. by volume, and ranked second on the list ...

exchange. In February 2017, B. Riley acquired FBR & Co. in a $160 million deal to further scale its existing business. In May 2017, B. Riley acquired brokerage company, Wunderlich Securities for $67 million to expand its

wealth management Wealth management (WM) or wealth management advisory (WMA) is an investment advisory service that provides financial management and wealth advisory services to a wide array of clients ranging from affluent to high-net-worth (HNW) and ultra-hi ...

business. In August 2018, B. Riley acquired GlassRatner Advisory & Capital Group, a

restructuring Restructuring or Reframing is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. ...

advisory firm to expand its advisory presence. In November 2018, B. Riley acquired 49% stake of

broker-dealer In financial services, a broker-dealer is a natural person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers. Broker-dealers are at the heart of the securities and ...

National Holdings Corp from Fortress Biotech for $22.9 million. In January 2021, B. Riley acquired the rest of National Holdings Corp. In July 2022, National Holdings Corp's largest subsidiary, National Securities closed down after 75 years with its business being integrated into B. Riley. This came after National Securities was penalized by

Financial Industry Regulatory Authority The Financial Industry Regulatory Authority (FINRA) is a private American corporation that acts as a self-regulatory organization (SRO) that regulates member brokerage firms and exchange markets. FINRA is the successor to the National Associati ...

(FINRA). In April 2020, it was reported that B. Riley was benefitting from the

retail apocalypse The retail apocalypse refers to the closing of numerous brick-and-mortar retail stores in the United States, especially those of large chains, beginning in the 2010s and accelerating due to the mandatory closures during the COVID-19 pandemic. In ...

especially in 2020 due to the

COVID-19 pandemic The COVID-19 pandemic (also known as the coronavirus pandemic and COVID pandemic), caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), began with an disease outbreak, outbreak of COVID-19 in Wuhan, China, in December ...

. As many

brick-and-mortar Brick and mortar (or B&M) is an organization or business with a physical presence in a building or other structure. The term ''brick-and-mortar business'' is often used to refer to a company that possesses or leases retail shops, factory produc ...

stores closed, this gave B. Riley a lot of opportunities to provide liquation services. In June 2020, B. Riley acquired Alderney Advisors, a restructuring firm that specializes in the

automotive industry The automotive industry comprises a wide range of company, companies and organizations involved in the design, Business development, development, manufacturing, marketing, selling, Maintenance, repairing, and Custom car, modification of motor ve ...

2021 to present: Decline

On April 12, 2021, B. Riley became a constituent member of the

S&P 600 The S&P SmallCap 600 Index (S&P 600) is a stock market index established by S&P Global Ratings. It covers roughly the small-cap range of American stocks, using a capitalization-weighted index. To be included in the index, a stock must have a to ...

index. In August 2021, B. Riley acquired investment firm 272 Capital. In January 2022, B. Riley acquired middle market M&A advisor FocalPoint for $175 million. On February 8, 2023, Wolfpack Research announced it held a

short position In finance, being short in an asset means investing in such a way that the investor will profit if the market value of the asset falls. This is the opposite of the more common long position, where the investor will profit if the market value ...

in B. Riley. It released a report that criticized the company stating during the

everything bubble The expression "everything bubble" refers to the correlated impact of monetary easing by the Federal Reserve (and followed by the European Central Bank and the Bank of Japan) on asset prices in most asset classes, namely equities, housing, bonds ...

period of 2020 to 2021, B. Riley had

overleverage In finance, leverage, also known as gearing, is any technique involving borrowing funds to buy an investment. Financial leverage is named after a lever in physics, which amplifies a small input force into a greater output force. Financial leverag ...

d to buy speculative assets and lent money to companies that have a high likelihood of defaulting. Examples included

Exela Technologies Exela Technologies, Inc. is an American business process automation ("BPA") company. It was created with the merger of SourceHOV LCC, Novitex Holdings, Inc. and Quinpario Acquisition Corp. 2. Overview Exela’s software and services address ...

which owed B. Riley $75 million and had failed to complete interest payments on another loan on January 17, B Riley Principal 250 Merger Corp, a

special-purpose acquisition company A special-purpose acquisition company (SPAC; ), also known as a blank check company or a blind-pool stock offering, is a shell corporation listed on a stock exchange with the purpose of acquiring (or merging with) a private company, thus taking ...

that would result in a $175 million loss if it failed to find a target by May 11 and Babcock and Wilcox which owed B. Riley $110 million but was believed by Wolfpack Research to be heading toward bankruptcy. In addition, Wolfpack Research stated that 40% of operating companies in B. Riley's portfolio per its

Form 13F Form 13F is a quarterly report filed, per United States Securities and Exchange Commission regulations,going concern A going concern is an accounting term for a business that is assumed will meet its financial obligations when they become due. It functions without the threat of liquidation for the foreseeable future, which is usually regarded as at least the n ...

issues. Following the report, B. Riley's stock declined by 11%. In May 2023, it was noted that B. Riley paid a

dividend A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. The market has no control over the stock price on open on the ex ...

yield of nearly 11% which was much higher than its peers. It was speculated that the big reason for the increase was due to the sell-off of its stock. This was due to the slowdown in investment banking business as well as unrealized losses from investments. There was skepticism on whether paying such high dividends yields was sustainable. The stock had declined by almost 60% since the start of 2022 and the company's revenue in 2022 had declined by $474 million compared to the previous year. On November 13, 2023, shares of B. Riley dropped 35% after it disclosed unrealized investment losses and the fact

S&P Global Ratings S&P Global Ratings (previously Standard & Poor's and informally known as S&P) is an American credit rating agency (CRA) and a division of S&P Global that publishes financial research and analysis on stocks, bonds, and commodities. S&P is cons ...

downgraded Franchise Group to junk status, a firm which it acquired in May 2023 as part of an investor consortium for $2.6 billion. B. Riley had lent its founder Brian Kahn $200 million and Kahn was identified as one of two co-conspirators in a securities fraud case related to John Hughes and Prophecy Asset Management. In January 2024, it was reported that the SEC was investigating B. Riley for its connection to the securities fraud case which lead to its stock price declining 10%. At this point B. Riley was one of the most shorted companies in the financial sector. In March 2024, B. Riley posted a wider quarterly loss and halved its dividends. It also delayed filing its annual report, citing a review of transactions with Kahn. Its shares declined 15% after the announcement. On April 24, 2024, B. Riley filed its annual report after its auditor, Marcum LLP signed it off resulting in shares soaring 61%. In the report the audit cited multiple material weaknesses in the company’s reporting, and some of the previously reported data was revised. It also noted concerns about the fraud case involving Kahn but stated B. Riley had no ties to it after it redid an internal investigation with the help of

Winston & Strawn Winston & Strawn LLP is an international law firm headquartered in Chicago. It has more than 975 attorneys spread across ten offices in the United States and five offices in Europe, Asia, and South America. Founded in 1853, it is one of the large ...

. In August 2024, Bryant Riley made an unsolicited offer to take the company private at $7.00 per share, a 39% premium to the stock closing price the day the offer was made, though significantly lower than the $17 per share the stock was trading at one week prior. The company also eliminated its dividends, citing the need to prioritize cutting leverage. On September 9, 2024, B. Riley outlined preliminary plans to sell assets and renegotiate financings in order to bolster its balance sheet. The company confirmed that it is in talks to sell a majority stake in Great American Group and that it has a non-binding commitment for financing of its B. Riley and bebe brands businesses. The two transactions are expected to raise approximately $410 million of gross cash proceeds. These funds would be used to pay down existing debt facilities by the end of 2024.

Business operations

Business model

As of 2022, B. Riley has six operating segments:

capital market A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold, in contrast to a money market where short-term debt is bought and sold. Capital markets channel the wealth of savers ...

s, wealth management, auction and liquidation, financial consulting, communications and brands. Capital markets is the largest segment by revenue followed by communications and wealth management. As of 2023, Riley is currently the largest shareholder and owns 23% of the company shares.

Portfolio companies

In May 2016, B. Riley acquired

United Online United Online, Inc. was an independent public company formed by the 2001 merger of NetZero and Juno Online Services. It is currently a subsidiary of investment bank B. Riley Financial. The company's range of products and services has evolved sig ...

for $170 million. In November 2017, B. Riley outbid Carnegie Technologies to acquire

MagicJack MagicJack, stylized as magicJack, is a service that allows people in the United States and Canada to make phone calls over the Internet. This type of phone service is called Internet-based telephone service (VoIP). Originally, MagicJack req ...

for $143 million. In November 2019, B. Riley launched a fashion brand portfolio by investing $116.5 million to acquire majority ownership of six fashion brands. These included

Catherine Malandrino Catherine Malandrino is a French fashion designer. She resides between New York City and Paris. Early life and education Malandrino was born in Grenoble in the French Alps to Italian parents. She began her professional career in Paris after at ...

Joan Vass Joan Vass (1925-2011) was an American knitwear designer and founder of the company bearing her name. Early life and career Joan Isabel Kaplan was born in New York City on 19 May 1925. She studied philosophy and history of art at Vassar and the U ...

Limited Too Limited Too is a clothing and lifestyle retailer, and current brand, targeting the tween girl market, formerly owned by Tween Brands, Inc. (formerly known as Limited Too, Inc. and Too, Inc.). Since 2015, the brand has been owned by Bluestar Allia ...

and

Nanette Lepore Nanette Lepore (born January 1, 1964) is an American fashion designer based in New York City. ''New York'' magazine has said that "her gypsy-influenced designs are feminine and youthful. The looks are full of bold colors and bright prints, with ...

. In May 2023, B. Riley acquired an

equity interest Capital participation (sometimes also called ''equity participation'' or ''equity interest'') is a form of equity sharing not restricted to housing, in which a company, infrastructure, property or business is shared between different parties. Share ...

in Scotch & Soda.

Legal issues

Gary Wunderlich

In January 2015, Wunderlich Securities acquired New York brokerage firm

Dominick & Dickerman Dominick and Dickerman LLC is an investment and merchant banking firm headquartered in New York City. It also has offices in Basel, Switzerland. From 1899 to 2015, the firm was known as Dominick and Dominick but after selling off its wealth man ...

in an all-stock acquisition deal worth $8.3 million. Dominick and its former chairman, Michael Campbell sued Wunderlich Securities and its former owner, Gary Wunderlich alleging fraud and misrepresentation by Wunderlich Securities regarding its financial condition when purchasing the firm. In April 2020, FINRA sided with Dominick and Campbell resulting in Wunderlich Securities being liable to pay nearly $11 million B. Riley had to pay the full amount to settle the dispute. In June 2020, Wunderlich sued B. Riley to confirm his

indemnification In contract law, an indemnity is a contractual obligation of one party (the ''indemnitor'') to compensate the loss incurred by another party (the ''indemnitee'') due to the relevant acts of the indemnitor or any other party. The duty to indemni ...

in the matter and reimbursement for his legal fees in the arbitration. In June 2023, B. Riley rejected this claim. In January 2022, B. Riley sued Wunderlich, alleging he unlawfully skirted his liability in April 2020. Wunderlich's lawyer stated B. Riley had agreed to indemnify his client as part of the 2017 purchase.

References

External links

* {{authority control 1997 establishments in California American companies established in 1997 Companies based in Los Angeles Companies listed on the Nasdaq Financial services companies established in 1997 Investment banks in the United States