B. Riley Financial (NASDAQ: RILY) shares slumped over 27% by the close of trade on Thursday, extending losses for the sixth straight session to their lowest in a decade on lingering worries over a second-quarter loss and regulatory scrutiny.
The stock has been hammered this week after the Los Angeles-based investment bank also delayed filing its regulatory reports.
On Monday, shares tumbled 52% after B. Riley warned of a loss of between $435 million and $475 million for the three months ended June. That compared with a profit of $44 million, a year earlier.
The bank also warned it could report a markdown of $330 million to $370 million in the quarter related to its investment in Vitamin Shoppe-parent Franchise Group. The deal had attracted scrutiny from shareholders and regulators.
This was the third time the bank delayed its reports with the Securities and Exchange Commission (SEC) this year. B. Riley said the holdup was due to delays tied to finalizing the valuations of certain loans and investments.
The company’s shares halted multiple times for volatility and closed at $5.04, the lowest since May 2014.
The stock, down more than nearly 76% so far this year, was among the top 10 losers in the Nasdaq composite index on Thursday. The rout has wiped out about $360 million of the bank’s market value so far this week.
The company did not offer any immediate comment on the stock fall.
About 78% of the free float is sold short, which is close to the highest in at least five years, according to estimates from ORTEX Technologies.
Short interest picked up significantly starting around September, climbing above 20% of the float, and ramped up sharply, peaking in March at about 80% of the free float.
Short interest slipped to below 50% by mid-June but has risen sharply as the stock tumbled.
In July, B. Riley (NASDAQ: RILY) and its CEO received subpoenas from the SEC, primarily related to the bank’s dealings with Franchise’s former CEO, Brian Kahn.
Bloomberg News reported in November that Kahn was a co-conspirator in a securities fraud involving Prophecy Asset Management.
Kahn has denied the allegations made in the report, saying he never knew that Prophecy Asset was allegedly defrauding investors.
Earlier this year, an external investigation and an internal review cleared B. Riley of any wrongdoing.
(Source: Reuters)
