On Thursday, B. Riley Financial (RILY) lost nearly 28%. The weekly loss is now 70.98%. What happened?
The firm said on Monday that it would write off up to $370 million. This is related to its mal-investment in Franchise Group. The firm acquired the FRG stake last year in a management-led buyout. The investment in the fashion firm proved costly. B.
Riley will report a Q2 loss and will suspend its dividend.
On Tuesday, the Securities and Exchange Commission said that it would review the way it disclosed risks associated with some of its assets.
The stock plunge will cause panic among B. Riley’s hedge fund customers.
RILY stocks will have no value when the dust settles.
The Bear Cave correctly predicted the fall of RILY stock in February. The firm believed back then that B. Riley operated fraudulently.
The firm’s baby bonds, RIYN and RILYZ, are also at risk. It must pay off $1.5 billion.
Investors should exercise extra care on stocks that continually trended lower on no news. Walgreens Boots (WBA) is an example of a stock trading poorly before falling even more. WBA stock peaked near $30 but fell to around $16. After posting Q3 results, selling pressure worsened.
Walgreens may potentially rebound. It hired a new CEO who will undo some of the firm’s past acquisitions.