valueseek
@valueseek_inv
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Independent analyst; opinions, unvarnished thoughts; *not* investment advice. Logical, respectful and interesting discourse. Posting @
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There’s “Value Investors” and “Low Multiple Gamblers.” The former think of downside protection and capital preservation first. The latter 🤷🏻♂️
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Finished “These Are the Plunderers” by
@gmorgenson
yesterday. Recommended by
@ParrotCapital
- I believe. If you think PE is bad for society, you don’t think that enough.
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The involvement of PE in healthcare is a huge tragedy. The beginnings of some of the firms described will have your hairs
up. And some of the practices PE depends on are just nefarious. A mix of pursuit of every last dollar at any cost, moral hazard, crony capitalism,
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It only took 6 months for the company to admit that it received SEC subpoenas. Shameful! $RILY
For anyone still unsure about the likely investigation on $RILY see the January 2024 SEC FOIA logs for exemption B7A at and the explanation of the exemption at .
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$RILY total $CONN exposure is estimated at $93 mln direct loan to finance the Badcock transaction + $42 mln Freedom VCM note receivable linked to BRCII (Badcock) receivables + the exposure through Freedom VCM equity ownership of $CONN’s (or 31% of ~$65 mln at cost, approx.) =
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As usual the monopolists of credit opinion are late and issue a downgrade of FRG’s debt when the 1st lien TL is trading in the 60s… still better late than never… “negative cash flows”… we said months ago $FRG equity was likely zero imho based on not as bad conditions… $RILY
Here is the FULL DOWNGRADE by Moodys of The Fraud known as Franchise Group.$RILY has 500 million exposure to this and that is equity and a worthless loan to Brian Kahn . The amount of his garbage in the hands of their clients is also a 8-9 figure sum...
@FriendlyBearSA
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The equation for $RILY management is not an easy one.
At least two issues spring to mind:
💸 Dividend: keep it at all costs so stock doesn’t collapse OR cancel it to avoid possible conveyance issues?
🧮Freedom VCM valuation: mark it properly, likely destroying book value OR
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Not all heroes wear capes.
@FriendlyBearSA
@AureliusValue
@WolfpackReports
@AlderLaneEggs
@unemon1
@ParrotCapital
@JrAbbate
(couldn't get a good enough image with every hero shown so apologies for not having everyone displayed!)
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$RILY credit agreement with Nomura -- Affirmative Covenants require *clean* & *audited* financial statements...
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*see warnings in linked post* including *not investment advice*. -- "Funny things that (could) happen." $RILY $FRG $CONN
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And here it is: $CONN Ch. 11 8-K is out. The $93M 2LTL $RILY provided was still outstanding at filing, meaning none of the Delayed Draw TL $50M was extracted and paid back to Riley (which is kind of surprising to me).
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Why would Howard Marks / Oaktree become *partners* with B. Riley? This news strikes me as odd and perhaps false. I would not want to be partners with certain folks. Why not buy the entire “units”? Weird. $RILY
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🧵$RILY 10-Q - Some Observations
1/
The $200.5mln loan principal's FV was reduced by a "whopping" 8.6%. Using a simple default / loss given default model, we see implied probabilities of default are still possibly understated on this loan (which is surprising given PIK nature).
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$JPM filed 1Q24 earnings today... but $RILY can't file a 10-K for the period ending 12/31/23.
Today marks 103 days since the end of the FY23 and 43 days since the deadline to timely file.
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B. Riley Financial $RILY -- An updated exercise on cash available. See warnings / disclaimers (*not* invesment advice).
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A public, unpublished document shows $RILY had a confidential settlement w. Vintage in October '19, several months after it was claimed the RAC merger situation had been resolved (April 2019 Settlement). *not investment advice*
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-- see warnings in linked text, including * not investment advice * --
$RILY "A Cash Scenario Analysis Raises Heightened Potential Concerns"
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This is BIG. Kudos to
@AureliusValue
for making the direct link between $RILY, Samjor (Kahn) and Prophecy.
Big!
Documents prove $RILY directly financed the Prophecy Ponzi Scheme's Sub-Advisory entity at the very center of this giant fraud (Samjor Family). $RILY later rolled Prophecy-related exposure into loans to Kahn entities that ballooned into disastrous "bet the firm" FRG deal 1/
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This new lawsuit on the FRG take-private is a good overall summary of the extensive ties between Kahn/Vintage and $RILY and makes distancing itself from Kahn difficult for B. Riley.
The lawsuit, to this reader, also seems to have merit. A judge would look at it from the
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$RILY... the delay to file the 10-Q at this stage makes one wonder if they have even worse news they are holding back on...
Some candidates:
🦊 Non-reliance on prior financials
🧔♂️ Substantial doubt about going-concern hypothesis
👨💼 More serious write-downs of intangibles
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$RILY 13F filed shows continuing pattern of liquidations of more liquid assets. Changes are mostly sales of all of Alta ($44.6m), Perpetua ($4.7m), Lilium ($2.6m), Cadiz ($3m), Faze ($2m) and a little bit of others. The 13F amounts to $105 mln now (1Q24) vs. $156 mln at FYE.
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$RILY management surprised today by taking the hard pills of canceling the dividend and marking down FRG significantly in a “preliminary” earnings release. The mark down still leaves about $100 million of FRG related exposure on the books, in the best case.
The equation for $RILY management is not an easy one.
At least two issues spring to mind:
💸 Dividend: keep it at all costs so stock doesn’t collapse OR cancel it to avoid possible conveyance issues?
🧮Freedom VCM valuation: mark it properly, likely destroying book value OR
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$RILY 8-k with amendment to Nomura credit agreement… $86mln repaid… cancels Revolver… sets a Sept/25 clock… allows for 10x leverage… min liquidity is “minimal” $60M… changes to Borrow Base calcs… plus allows for PIK interest. PLUS Ken Young left firm.
Alas we don’t see
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Asking for a "friend": If I am a US publicly traded small-cap and my auditor bill is $8 mln (yes, for a single year) - is that a sign of anything?
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Two short articles memorializing thougths I published this week:
i) about "what matters" and
ii) about $BW going concern .
Hope to have a third, more extensive one soon-ish.
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$RILY instituted a clawback policy in case of a Restatement. Not suspicious at all.
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Repost: every filing with less than full and fair disclosure is another possible legal liability. It seems possible $RILY are not being completely forthcoming about what is happening. "Continue to work productively" - define "productively". (Opinion!)
WilmerHale Aug/23: NT or 12b-25 not simply an "extension" but a **substantive disclosure document**.
Restatements after stating that Co. "does not anticipate any significant changes to the financial results for the fourth quarter" are a BIG no no.
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This is a most peculiar 8-K. While new rules regulate disclosure of "material cybersecurity incidents," why would $RILY choose to disclose an immaterial incident?
Makes one wonder what bearing, if any this could have related to future potential "explanations" for 10-K delays.
The hits just keep coming for $RILY and their train wreck of horrific portfolio companies.
The IT systems at B Riley subsidiary Targus just got compromised by a threat actor and goodness knows what exactly happened, as you shouldn't expect them to give a timely and complete
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$RILY touts before:
👉 “Company will post earnings on time and it will be deadly to the shorts! BULLISH!”
After:
👌 “Of course the company needs more time! They were late for the annual! IRRELEVANT!”
🙄
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🧵1/
- $FRG acquires Badcock ("WSB")
- $RILY funds WSB a "final time" in 1Q23 ("negative trends")
- $RILY then decides to OWN $FRG ("intended to submit a non-binding offer to acquire [$FRG]")
- Structured so NO $RILY control
@ParrotCapital
@FriendlyBearSA
@AlderLaneEggs
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Conservative math: $FRG Term Loan was 78% of par (22% discount). The equity in FRG is junior so it should get >=22% discount too. Applying to the Vintage loan ($201mln) and to the FRG mark ($287mln) leads to a $107mln loss from 12/31/23. This is about 37% of $RILY book equity.
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Detailed analysis shows US GAAP likely calls for Freedom VCM consolidation by $RILY
🧵1/ Following ASC 810 rules systematically and in detail shows that Freedom VCM is a VIE to
#BRiley
, that Riley is the Primary Beneficiary and that it therefore must (under US GAAP) consolidate
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Another day, another pump on $RILY on highly caveated and disclaimed “information.” Instead of working on a 10-Q the scheming to maintain the stock afloat goes on. I wonder when we’ll actually see any proper filings for any or all of this (remember filing with the SEC has legal
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"Payment in kind" notes are they paid... "in kind!" Via issuance/receipt of more of the notes.
Accounting entries for which:
Dr. Notes Receivable x
Cr. Interest Income x
That income should not show up in "prepaid expenses".
Strange choice here by $RILY.
@FriendlyBearSA
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B. Riley and Vintage Capital had an October 2019 Confidential Settlement.
#RILY
Court documents prove it.
This was not far too long after the RAC Settlement.
I don’t think people understand the possible ramifications.
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This claim by plaintiffs in the lawsuit is killer: “B. Riley has aided and abetted Kahn in defrauding investors in the Prophecy fund.”
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"Apparently... there are no current questions... This concludes our question and answer session." $RILY
Here's a current question: instead of writing down FRG-related instruments, should you not have consolidated FRG and written down the assets?
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$RILY may be readying the sale of their $BW shares. “Burning the furniture…” continues[?].
“On July 11, 2024, Babcock & Wilcox … entered into a registration rights agreement … with B. Riley Securities, Inc. (“B. Riley”)... agreed to provide B. Riley with customary demand
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$SNCR was very likely “forced” by B. Riley to return capital to $RILY. I read it as “burning the furniture to heat up the house” as
@AlderLaneEggs
says…
$RILY issued a 13D today on the below market price sale to SNCR of $19.7M in principal amount of the 8.375% 2026 Senior Notes
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Public filings show $FRG *potentially* has a big intangibles issue if "substantial doubt" about its going concern status. Sylvan and Conn's+Badcock *could* be interpreted as liquidations by accountants. ~54% intang. / tot. assets at buyout. Potential implications for $RILY values
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Ok, press release with earnings is out and Adjusted EBITDA is zero? $67 THOUSAND dollars? By their measure.
@FriendlyBearSA
@ParrotCapital
@AlderLaneEggs
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The indication that $RILY is willing to “move” other investments, tells me they likely don’t care about valuation and book equity anymore (given those probably dearly marked) and are just sucking for air (good ol’ cash) wherever possible.
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Now here comes S&P and *shockingly* downgrades $FRG corporate rating to *exactly* the same level as Moody's, a mere two days after Moody's action.
S&P places the recovery for the 1st lien TL at 70%, taking cue from the pricing of the very same TL in the market. Negligible
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In light of the
@HindenburgRes
report on $AX let’s review some important Axos relationships. This is what many would call a “clique.”
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Waiting for some $RILY reading material. Either a Merger Agreement (ha!) or a Form 4. Or an 8-k with some board activity. The only thing that makes no sense right now is 🦗
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$CONN exposure at $RILY is very significant for this $700 mln market capitalization broker/dealer:
$93 million loan direct exposure
+
Indirect exposure through Freedom VCM
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$CONN roundtrip almost concluded. 12/18/23 was when they announced the Badcock furniture deal + $108 mln loan from $RILY. This loan could possibly be put into question as indirect financing of $FRG.
$CONN share price gains since the deal are vanishing.
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On 3/20/2019 a certain merchant bank CEO pledged over 4 million shares of his company to $AX bank.
On the same day, $RILY stock traded between $16.63-$17.10 low/high (div. adjusted).
$RILY now trades at $15.80.
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POV: Patiently waiting for $CONN's 8-k on it's likely very material filing under USBC Ch. 11 protection from it's numerous creditors.
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It is emblematic of the quality of $RILY investment assets that they are attempting a sale of an operating unit rather than liquidating more investment assets.
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$RILY TL to $CONN is also a second lien!
It seems possible that “Fin
@c
$ is a bad word?”
Next time *don’t* lean into the “F” word (Finance? Franchise? Fr
@ud
?)
This spells Curtains for $Rily
@DonalGriffin1
..Huge write downs coming..
@FriendlyBearSA
@AureliusValue
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$RILY conference call question wish list: 🗒️
💬How much did you mark $FRG down by?
💬How come this is still not zero based on the market pricing of the Term Loan?
💬Q: are you going to say anything about consolidation?
💬Wen 10-Q?
💬Can you estimate the cash burn from Noggin?
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🧵4/
The Consolidation of Freedom VCM would be mandated by GAAP even if the VIE methode failed, because the following step in the analysis is VOE or voting interest, which $RILY controls by virtue of management of 2 “Private Shares” LLCs.
GAAP has many routes to arrive at the
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I am not a specialist, but is it odd that $RILY chose to use item 8.01 Other Items ("filed") vs. 7.01 Regulation FD ("furnished")? FD bc seems management discussed the 10-K status with some investors so FD would be in order? Filed carries legal liability/ furnished doesn't.
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Regarding $RILY, today is a day I will remember, even though I think the story is not over yet.
I reached out to a number of people regarding this, as early as January. Some people were interested, some didn’t have a clue, and others who by virtue of their long and vast
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$FRG filing shows the company gave Kahn a $15 mln loan in exchange for the green light for the $CONN transaction and certain governance changes. H/t
@FriendlybearSA
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Not an attorney but paragraph 1b(ii) of the $RILY Guaranty to $BW (which becomes relevant and perhaps critical now) calls for, after 2 consecutive Q of a cov breach, for
#BRiley
to make equity investment/new loan. Can an attorney verify pls?
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"Independent auditors should not only be independent in fact; they should avoid situations that may lead outsiders to doubt their independence."
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In May a company called Caliza sued $RILY / Great American for non-payment after some “retail liquidation” work. It was a relatively modest amount ($183k or so) but the fact is that they filed suit. The lawsuit was voluntarily dismissed when the judge questioned jurisdiction. We
$RILY stock touts are promoting the liquidation of $CONN in bankruptcy as actually a good thing due to the "expertise" of B Riley, while playing
#BlameTheShorts
.
Only in the make believe land of these shills is bankruptcy and massive restatement of financials bullish!
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$RILY strategy update: await for hyperinflation to render $201
million immaterial. File 10-K. 🤔
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Statements such as “a business can operate normally without a 10-K” are akin to “the kitchen is working so it doesn’t matter that the Dept. of Sanitation gave them a C Health Grade and can take their license.”
Clearly people are not thinking straight about this sort of situation
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-- see warnings in linked text including *not investment advice* -- "Interlinkages Between B. Riley, Babcock & Wilcox, Axos Financial and BR and why they (could) matter (Part 1)"
$RILY $AX $BW
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For anyone still unsure about the likely investigation on $RILY see the January 2024 SEC FOIA logs for exemption B7A at and the explanation of the exemption at .
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For anyone thinking $RILY is the new $GME: ppl had grown up with GameStop, worked as teens to buy whatever latest game or console at GameStop. There was an emotional component there. People wanted to be a part of saving it. Not many ppl *imho* gives two rats ass about B. Riley.
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I’m not sure if it was
@FriendlyBearSA
who said it but whoever said it, is right. Nothing happens, nothing happens, nothing happens. And then “one day you come to the office and something happens” that makes you fall of a chair. Time is not on their side. $RILY
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Further thoughts on B. Riley: after a bona fide effort one simply cannot easily locate the FRG acquisition in the Statement of Cash Flows for the 3Q23 period at $RILY. See "Questions on accounting for the FRG acquisition."
@AlderLaneEggs
@FriendlyBearSA
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8/
Also old, I wonder if the $CONN shareholders (or directors) ever read this. $FRG
Alas, $RILY would support Badcock yet again.
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What would cause $FRG to redo it’s 2022 and June/23 financials? 👀👀👀 Why would $RILY mention this? 🧐🧐🧐
@FriendlyBearSA
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🧵3/
Freedom is the source of risks/rewards that are to be absorbed by the “variable interest”. The VIE model considers both the PIK Loan to which $RILY is exposed as well as the direct equity (variable interests).
Rules also show that
#BRiley
and related parties have the right
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$RILY B. Riley Principal and cos $IREN and $SCLX canceled some Standby Equity Purchase Agreements - this is slightly dated but possibly indicative of balance sheet constraints or a strategy shift. Deals terminated:
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This is a phrase for the ages: "(...) no longer managing a business, he is managing a margin call." -- Bookmark it.
(10/n): At this stage Bryant Riley is no longer managing a business, he is managing a margin call $RILY
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$RILY: “Selling the furniture to heat up the house.” Indications that liquidations very likely continued in the 1Q24 and don’t bode well for business activity & trends. We’ll see today (IF there’s a 10-Q - it’s always if.)
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2/
Point is: the story, as told in the SEC filing, seems to have been that Riley wanted to own $FRG; just didn't want to *seem* like it owned it.
Pls read "Background of the Merger" (links follow) & make own conclusions.
$RILY may get most (but not all) of its wishes soon.
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7/
The DCF analysis run as of 12/31/26 arrived at a negative valuation as well for W.S. Badcock. $FRG $RILY $CONN
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BREAKING: Entire $RILY complex, including $BW.
@FriendlyBearSA
showing again why he's one of the very best in the business, uncovering very problematic (but not entirely surprising) lawsuits involving BW.
$RILY co $BW was sued for tens of millions of dollars for unpaid invoices in their solar business. They are now trying to silence whistleblowers who helped expose malfeasance. $BW failed to disclose these lawsuits; problematic given "going concern" warning / liquidity problems
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In light of today’s findings on $RILY, to me it makes more sense why the 2/22/24 Statement from the BoD never got an 8-K… when you’re saying things that maybe you don’t want to add to the problem… just don’t.
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@AlderLaneEggs
The FRG / Freedom equity (and the Vintage loan) should both be marked at zero if one based the valuation on the pricing of this TL.
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$NOGWQ $RILY Maybe no one cares... but!
"In [Sep./23], [Nogin] obtained two loans for a total of $1.5 million ... with an ... interest rate of 42% and debt issuance cost of $73 thousand..."
42%!
Disclosed after the fact in the Q, but no 8-K was filed. I'd say 42% material.
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Another reminder: if you don’t yet follow the 🦜… follow the 🦜!
One of the smartest and hardest working folks out here by far.
Always insightful and entertaining!
A massive shoutout is owed to you, my audience. Thank you very much for your continued support of Parrot Capital.
I enjoy posting my insights for you, especially knowing that you value them and share them with others.
I have some exciting things in the works for you folks in
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Where are the $RILY margin call SEC filings? This is a reminder that the SEC enforces these (Form 4/Forms 13G & D) and “that reporting persons cannot discharge their filing responsibilities by tasking the issuer, broker or outside counsel to handle the filings.”
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No insider purchases of $RILY since 12/15/23. Those who are long make claims of an obscure "blackout" period, unsubstantiated, especially when contrasted with last year's multiple buys by insiders -- including the DAY BEFORE filing the K.
@BSacamanoV
@JonathanWeil
@mcelarier
@business
@ParrotCapital
Mr. Riley's 3/15/23 open market purchase and the FY22 10-K filed 3/16/23 both linked below.
1 DAY BEFORE THE K - there were open market purchases.
This is not the only one but a good example.
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$RILY $FRG TL traded around 78% of par on 12/31/23 but of course Riley's management priced the equity above cost.
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It’s funny how the markets work. Some days $RILY is up, $BW is down. Yet, other days, $RILY is down but $BW is up! It’s almost like they are connected somehow! Like perhaps through some margin loan somewhere and someone was trying to defend it. Almost like that!
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🧵4/
What one hand takes, another one gives. Despite the haircut on the Freedom VCM shares, which sit within L3 Equity Securities FV of the $RILY assets, the "bucket" was gratiously awarded a 8.1x EBITDA valuation this quarter. This level was unseen in the last 12 quarters.
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🧵14/
By the Company's own admission, capital markets were depressed in 1Q24. $RILY's own calculation of Adjusted EBITDA (which benefits from management's choice of add-backs) is testament to that (and to concerns about cash from myself and others).
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@R5Crosby
@AlderLaneEggs
@FINRA
@SECGov
@AureliusValue
@FriendlyBearSA
Only thing is, the deadline for Red FD is *not* 4 days but immediate. “(…) no later than when disclosure of [MNPI] is made in a non-public forum or promptly after discovery of a non-intentional disclosure.”
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$GL should be on everyone's radar after
@FriendlyBearSA
called it last week as his short idea at
@SohnConf
and
@FuzzyPandaShort
provided a comprehensive report today. The FB presented the video to a mix of gasps and laughs from the audience at Sohn. Watch
Fuzzy Panda has just issued a scathing short report Globe Life insurance $GL claiming the executives are involved in a scheme to receive kickbacks while ignoring blatant fraud.
The stock is in absolute free fall this morning down over 17% 🔻, a continuation of a very nasty
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$RILY 8-k Item 3.01 - Notice of Delisting or Failure to Satisfy a Continued Listing Rule...
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5/
As far as the accounting for the deal:
"$RILY determined that (...) it would be necessary to [enter a transaction] in a manner that would not result in it controlling or having to consolidate the Company into its financial statements."
Seems relevant this week. $RILY
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BREAKING (satire!): I have just resigned as Head of Macro at Valueseek.
Release follows: “An agreement pursuant to which Mr. Valueseek has served as the Head of Macro at Valueseek was terminated on September 20, 2024.
On September 20, 2024, Valueseek entered into an agreement
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$RILY shorts likely have staying power: i) they trust the work that was put in to initiate and maintain positions, and ii) they mostly have enough gains to withstand volatility. Don't believe any assertions of "faulty" thesis - nothing has played out yet. They'll see this through
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@AlderLaneEggs
@Hedgeye
@KeithMcCullough
@FriendlyBearSA
Happy to report this individual has been suspended for his egregious statements today. “Hateful conduct” and “abusive behavior”. He cannot create alt accounts without violating other X rules.
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