Case Summary

B. Riley Financial

NASDAQ: RILY

Case Details

  • Coan v. B. Riley Financial, Inc. et al.
  • Class Period:May 10, 2023 - November 09, 2023
  • Date Filed:January 24, 2024
  • Jurisdiction:U.S. District Court, Central District of California
  • Docket Number: 2:24cv00662
  • Lead Plaintiff Deadline: March 25, 2024
Days Left to
Seek Plaintiff
33

Overview

A class action lawsuit has been filed against B. Riley Financial, Inc., (“B. Riley” or the “Company”) (NASDAQ: RILY) and certain of the Company’s current and former senior executive officers alleging violations of the Securities Exchange Act of 1934. The lawsuit is brought on behalf of all persons and entities who purchased or otherwise acquired, B. Riley’s common stock between May 10, 2023, and November 9, 2023, both dates inclusive, (the “Class Period”) and investors have until March 25, 2024, to seek appointment as lead plaintiff of the B. Riley class action lawsuit.

B. Riley is a financial services platform. The Company, through its subsidiaries, provides services including investment banking, brokerage, wealth management, asset management, direct lending, business advisory, valuation, and asset disposition. B. Riley’s clients include public and private companies, financial sponsors, investors, financial institutions, and individuals.

In May 2023, B. Riley entered into an agreement to assist its client, Brian Kahn, in leading a management buyout of Franchise Group, Inc. (“FRG”). Kahn is CEO of FRG. The $2.8 billion deal was completed on August 21, 2023. On November 2, 2023, Kahn was implicated as the unnamed coconspirator in a conspiracy to defraud investors of $294 million in funds. Specifically, the Department of Justice announced that Prophecy Asset Management (“Prophecy”) President John Hughes (“Hughes”) had pled guilty to the charge with two unnamed co-defendants, and the SEC filed a complaint against Hughes for the same misconduct. Bloomberg reported on that same day that Kahn had been identified by “a person familiar with the matter” as one of the unnamed conspirators.

On November 3, 2023, after the market closed, The Friendly Bear tweeted, doubting whether B. Riley knew of Kahn’s involvement and disclosed the same to Nomura. The Friendly Bear also commented that the DOJ’s charging document clearly implicates him Kahn in Hughes’ crime. There is a high chance of indictment here. On this news, the Company’s stock price dropped $9.02, or 22%, to close at $32.54 per share on the next trading day, November 6, 2023, on unusually heavy trading volume.

On November 9, 2023, after the market closed, the Company revealed significant details concerning the FRG transaction and the years-long series of complex financial transactions between B. Riley, Kahn, and the Company’s respective subsidiaries, which culminated in the August 21, 2023, transaction. Analyzing these complex transactions, The Friendly Bear reported that “B Riley ended up funding 281MM of what was around a 560MM equity check. That’s over 50% ownership. Yet they claim to have only 31% voting rights. It looks like B Riley engaged in some funny business to avoid consolidation and placed control of FRG in the hands of the star of ‘Prophecy’ – Brian Kahn.” On this news, the Company’s stock price fell $4.47, or 15%, to close at $25.60 per share on November 10, 2023, on unusually heavy trading volume. The Company’s stock price continued to fall $4.59, or 14%, over the next consecutive trading session to close at $22.01 per share on November 13, 2023, on unusually heavy trading volume.

The lawsuit alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that Brian Kahn had been credibly implicated in a conspiracy to defraud investors of millions of dollars; (2) that, in spite of this involvement, B. Riley continued to finance the transaction enabling Kahn and others to take FRG private through complex arrangements; (3) that the foregoing was reasonably likely to draw regulatory scrutiny to B. Riley; and (4) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.

*            *            *

If you purchased or otherwise acquired B. Riley’s (NASDAQ: RILY) common stock between May 10, 2023, and November 9, 2023, both dates inclusive, and suffered substantial losses, and you wish to serve as lead plaintiff in this lawsuit, we encourage you to submit your information to DiCello Levitt LLP via the form on this page. 

You can also contact DiCello Levitt partner Brian O’Mara by calling (888) 287-9005 or at investors@dicellolevitt.com. 

The deadline to apply to the Court to serve as a lead plaintiff in the B. Riley Financial lawsuit is March 25, 2024.

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