Shares of the investment bank B. Riley Financial (RILY 18.62%) had exploded nearly 19% higher at 10:30 a.m. ET today after the company announced that it had secured new debt financing.
Starting 2025 on the offensive
It’s been a tumultuous few years for B. Riley, which has been the subject of multiple short reports and an investigation by the Securities and Exchange Commission (SEC). The SEC investigated whether the bank properly made the public aware of the risks of some of its assets. B. Riley had to delay submitting SEC filings. The company also had to suspend its dividend and has reported some big losses. Shares in 2024 got crushed by 78%.
However, the company has come out swinging in recent weeks. On Feb. 24, B. Riley announced it would release its preliminary fourth-quarter results on March 3. B. Riley’s co-CEO Bryant Riley said in the release, “We look forward to providing investors with a broader update.” Yesterday, the company announced that it had regained compliance with the Nasdaq after submitting its third-quarter 10-Q.
This morning, B. Riley announced that it had secured $160 million of new debt financing from Oaktree Capital Management, most of which it used to pay down $118 million of outstanding debt tied to its Nomura senior secured credit agreement. This included as much as $35 million for the paydown of a loan and investment B. Riley made in a joint venture overseeing the liquidation of a fabric and crafts retailer.
The path forward
Investors seem to like what they are hearing, with shares rallying close to 50% this year. These situations can be difficult for retail investors to assess because there are so many unknowns and so much volatility. It’s also hard to know why funds are positioning themselves long or short — they may only have the intention of holding the stock or staying in a position for a few days.
While management sounds optimistic about the preliminary earnings, I would recommend investors stay on the sidelines for now or take only a very small speculative position.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
