B. Riley (RILY) stock short squeeze explained

By:
on Apr 24, 2024
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  • B. Riley’s share price went vertical on Wednesday.
  • The company published its long-delayed annual report.
  • It also sent an update about its probe on its relationship with Brian Khan.

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B.Riley (NASDAQ: RILY) stock price went through a major short-squeeze on Wednesday after the company published its delayed annual report.

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It also announced the outcome of a long-running independent probe about its operations and involvement with Brian Khan, a hedge fund manager who suffered substantial losses at Prophesy Asset Management.

In a statement, the company said that the independent probe came in line with its internal investigation last year. It concluded that the firm did not have any knowledge or involvement in Kahn’s dealings. The statement added:

“The results of the independent investigation confirmed that the Company and its executives had no involvement with, or knowledge of, any of the alleged misconduct concerning Mr. Kahn or any of his affiliates.”

Kahn, who has made several deals with B. Riley, made substantial losses at Prophesy and was ordered to pay $200 million to its clients. As part of the payment, Kahn had to pay cash and shares in Franchise Group, a company that he brought together with B. Riley.

RILY stock

RILY stock chart

B. Riley also published its final results for the year that differed from its preliminary ones. Its revenue for the year came in at $1.644 billion, lower from the preliminary figures of $1.67 billion.

Its net loss stood at $108 million while the amount of its assets came in at $6.07 billion, down from the estimated $6.10 billion. The management believes that they can turn around the company.

Kahn’s issue is not the only one that concerns investors. For one, the firm has made some questionable deals in the past few years. For example, it acquired a computer accessories maker known as Targus in a $200 million deal in 2022. It has written down some of these funds.

The company, together with Khan, acquired Franchise Group in a $2.8 billion deal. Franchise, which owns companies like Vitamin Shoppe and Sylvan Learning, is now valued at much less after the company was slashed into junk by S&P Global.

These issues have made B.Riley one of the most shorted companies in Wall Street with a short interest of over 75%. Only companies like SunPower, XTI Aerospace, and IMAC Holding are doing worse. It is unclear whether the stock will continue rising since the company has more issues going on.

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