Financial services company B Riley (RILY) which had gotten a bounce in the last week up into the $24/share area are tumbling again–trading this morning at $18.62. Shares had been as high as $43 only a month ago. Short sellers have had the company under attack all year long starting in February with a report from Wolfpack Research.
As we all know RILY has made a gaggle of marginal investments all of which Richard LeJeune covers on Seeking Alpha in a credible argument on the bullish side from last week. Richard argues that fair value on the common shares is around $57 in spite of bad investments.
To name a few of their problem investments they include the Franchise Group, the Arena Group, Babcock & Wilcox and most recently Synchronoss Technologies.
Of course B Riley has many baby bond issues outstanding, as well as 1 preferred issue and their common stock. The yield on their common stock is now over 20%–great opportunity or trap? All of their issues are here.
The speculator in me wants to buy some of RILY’s securities–but the conservative in me says ‘don’t do it’. I won’t be participating in this potential ‘bargain’.
RILYO mature date 5/31/2024
I bet on RILYO
Agree…I’d rather hold RILYO for the next six months than anything tied to commercial real estate.
I always get my investment advice off the ‘Twitter’ , hey it’s free too! LOL’s. Most short sellers get burned! But do agree Richard LeJeune is a disaster for advice. Remember Seeking Alpha is relatively your next door neighbor with too much time on his/her hands , working in the spare guest room .
Tim:
You neglected to mention RILY’s silly venture into buying laptop bag maker Targus for $250 Million last year, which they have already had to mark down.
I agree with Grid – that Seeking Alpha fellow you mentioned is clearly NOT somebody I would bet my money on. His analysis is rarely a true deep-dive, which should be required since he often takes flyers on junky income oriented securities (preferreds issued by HCDI, Ontrak that have essentially gone to zero, etc.) with enormous risks.
Finding holes in his bullish analysis is often like shooting fish in a barrel.
Buyer beware with that guy.
FRG seems like an important part of RILY, So the question for me is whether there are deeper problems inside the Franchise Group than unsold furniture. After all, the FRG CEO’s problems with his side business were public knowledge 2 years ago, available to anyone with Google. So I wonder, how deep was / is RILY’s acquisition DD given the recent RILY public statements dismissing the FRG concerns.
The good news – Last year’s Kohls acquisition fell through so I was still able to get my annual Black Friday flannel shirt at Kohl’s instead of from RILY/FRG/various PE sharks. Can’t imagine what RILY / FRG balance sheet would look like with billions more of added debt waiting to be rolled over. Or how I would feel this winter without my new flannies and matching long-sleeve thermal undershirt.
Just my opinion. DYODD.
I’m guessing if you were to get your annual Black Friday shirt from RILY/FRG, it would be fleece, not flannel..
RILYO would be the only trade I’d consider on this one, but to some extent even that ship has sailed. Managed a quick in and out trade with it recently but most likely will move on to other opportunities. I love to circle while others are running away, but I just don’t really understand this enough to confident about any move.
I don’t know, if you can get lending fees on RILYO it’s still pretty attractive.
Who is willing to pay a lending fee of +100% to short RILYO while longer dated bond are cheaper?
Lies
I think it’s actually about 30%, and I have no idea, but I’m happy to take their money.
https://www.fidelity.com/trading/fully-paid-lending
Tim, listen to those inner voices. Your not crazy, most of the time they keep you out of trouble. The one or two opportunities you might miss are not worth taking the risk.
Tim, I would rather flip a coin than take that dudes analysis. Look under his bio and public recos through the years. More than a few are near worthless now, so he likes playing in the dirt box without any sand. He lost any credibility with me when he was recommending Amtrust issues. Not because of their price movement or the company itself. But because he stated Amtrust was rated A- by rating agency A.M. Best. He commented the article took many hours to write but he mislead stating Amtrust was rated A-, but that was only the claims paying ability of the subsidiaires. I can care less if claims get paid, I as investor need to know the credit quality for me as an investor! The baby bonds are at the hold co level and were clearly rated sub investment grade but he never mentioned that. Imagine that. Plus the fact in past I had to explain to him that trust preferreds could be QDI and not always debt/interest didnt inspire me either.
agreed – the potential only play here in my book is to sell way out of the money puts on the common for big premo – Jan $7.50 puts can fetch $80 so you’re break even would be $6.70 for RILY. Still very speculative but might be worth a trade.
You’re quite correct. FWIW I sold for $85. Fair volume and open interest.
GREAT minds – I did too at $85 – small position.
I had RILYZ for some time but took my lumps and dumped just under 20 earlier in the year. Not sure I’d buy it now for anything other that a short term trade. Selling OTM puts on the common might be rewarding – premiums are sky high.
$RILY has been a target of short seller Marc Cohodes for quite a while
https://twitter.com/search?q=%24rily%20(from%3AAlderLaneEggs)&src=typed_query
Cohodes did an excellent job of shorting Silvergate Capital.
FWIW I am short some RILY Calls and plan to add.