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B. Riley (NASDAQ:RILY) is down 26% this week as the pinnacle of 1 if its firms could also be going through fraud allegations.
Brian Kahn, the pinnacle of Franchise Group, was named by Bloomberg as a doable co-conspirator in a $294 million fraud case in reference to a co-founder of Prophecy Asset Administration. B. Riley invested practically half a billion {dollars} this yr in Franchise.
On Wednesday, B. Riley (RILY) CEO Bryant Riley defended its funding and relationship with Kahn because the funding agency reported its Q3 outcomes.
“I do know that at present a press release got here out from Brian denying any involvement in what occurred with Prophecy, and that is ok for me,” Riley mentioned onthe firm’s Q3 earnings convention name on Wednesday. “So I need to simply be crystal clear: I consider we’re going to make some huge cash for our shareholders in Franchise Group.”
“We’d have purchased all of Franchise Group. We’re an enormous fan of that enterprise and it is a actually easy evaluation,” Riley, the founder and chairman of B. Riley, mentioned.
B. Riley (RILY) shares dropped 22% on Monday following a report Thursday that Kahn was affiliated with Prophecy Asset Administration, the place the co-founder final week pleaded responsible to defrauding clients of $294 million, in keeping with Bloomberg.
A consultant for Kahn did not instantly reply to a telephone name and voicemail message from Searching for Alpha for remark.
In August, Kahn, with assist from B. Riley (RILY) and others, led a management-led buyout of Franchise Group, which has companies together with The Vitamin Shoppe, Pet Provides Plus and American Freight, for about $2.8B. The transaction represented B. Riley’s (RILY) second funding in Franchise Group. The corporate took an preliminary funding in Liberty Tax, which ultimately turned Franchise Group, in 2018.
The latest share drop in B. Riley (RILY) additionally comes because the agency has been the goal of some short-seller stories this yr, together with one in February. B. Riley quick curiosity is 24%.
–With help from Christiana Sciaudone
