Law Offices of Howard G. Smith announces that a class action lawsuit has been filed on behalf of investors who purchased B. Riley Financial, Inc. (“B. Riley” or the “Company”) (NASDAQ: RILY) common stock between May 10, 2023 and November 9, 2023, inclusive (the “Class Period”). B. Riley investors have until March 25, 2024 to file a lead plaintiff motion.
Investors suffering losses on their B. Riley investments are encouraged to contact the Law Offices of Howard G. Smith to discuss their legal rights in this class action at 888-638-4847 or by email to howardsmith@howardsmithlaw.com.
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 [i.e., 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 complaint filed in this class action 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 B. Riley common stock, have information or would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Howard G. Smith, Esquire, of Law Offices of Howard G. Smith, 3070 Bristol Pike, Suite 112, Bensalem, Pennsylvania 19020, by telephone at (215) 638-4847, toll-free at (888) 638-4847, or by email to howardsmith@howardsmithlaw.com, or visit our website at www.howardsmithlaw.com.
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View source version on businesswire.com: https://www.businesswire.com/news/home/20240125594983/en/
Contacts
Law Offices of Howard G. Smith
Howard G. Smith, Esquire
215-638-4847
888-638-4847
howardsmith@howardsmithlaw.com
www.howardsmithlaw.com
