RILY: A Bottom Feeder Investment Bank That is Crumbling Before Our Eyes

Calling RILY a second-tier investment bank would be the highest compliment RILY ever received; we see it as a lender of last resort for the dregs of the public market. As financial conditions have contracted, RILY has not sobered up and cut its losses on failing investments, instead it has extended its distressed clients more capital so that it can pretend that better times are just around the corner.

We are short B. Riley Financial, Inc. (Nasdaq: RILY) because our research shows it 1) overleveraged to buy speculative assets during the financial mania of 2020-2021 and 2) lent money to companies that have degenerated into zombies. RILY’s total cash and investments, net of debt, fell by $950 million to -$350 million during 2022. Further, we believe RILY will record investment losses of up to ~$700 million in 2023, putting its dividend at risk, and potentially triggering a collapse of the firm.