I'm a member of the Capital Mindset community (this is how I discovered and subbed to you) and RILY was a big short candidate in the community last year. I'm a bit surprised on your stance, I think the short seller's thesis was very warranted. You didn't mention the adverse opinion that they got from their auditor (that they had since 2009) that I believe had to do with the way they were accounting for the value of their internal businesses like FRG. I don't remember all of the details, but the big picture idea was that RILY was inflating the value of their assets (if I remember correctly) and becoming increasingly overleveraged in an unsustainable interparty way that led to the deterioration of the business but the majority shareholders (mainly B Riley himself) getting paid a fat dividend. Marc Cohodes was all over this one. Would be interested in hearing your rebuttal to this as respectfully, I think this thing is a pile of garbage. Long JXN
Dividends and preferreds are both suspended. The valuation is vindicated by the Great American Group sale at $300 million. Marc Cohodes is a skilled short, but many of his claims were demonstrably false. For the last two years, shorting was the winner. Every source I have says it's a company run be good people, good in skill and character.
RILY's baby bonds and preferred units are quite an interesting proposition. After the April drama, prefs (RILYP and RILYL) traded at nearly a 100% current yield.
For now, I am staying on the fence, but I may soon take a position.
Speaking of the preferred, that’s truly where the speculative action is. Check out RILYL and RILYP. I’ll play small ball on those kinds of asymmetries all day long…
What's amazing about the preferred, they can't go private or be acquired without settling them at par, or the debt being a liability of a stronger company. It has a ceiling of par plus cumulative divvy, but it also has a higher probability of a high return.
I'm a member of the Capital Mindset community (this is how I discovered and subbed to you) and RILY was a big short candidate in the community last year. I'm a bit surprised on your stance, I think the short seller's thesis was very warranted. You didn't mention the adverse opinion that they got from their auditor (that they had since 2009) that I believe had to do with the way they were accounting for the value of their internal businesses like FRG. I don't remember all of the details, but the big picture idea was that RILY was inflating the value of their assets (if I remember correctly) and becoming increasingly overleveraged in an unsustainable interparty way that led to the deterioration of the business but the majority shareholders (mainly B Riley himself) getting paid a fat dividend. Marc Cohodes was all over this one. Would be interested in hearing your rebuttal to this as respectfully, I think this thing is a pile of garbage. Long JXN
Dividends and preferreds are both suspended. The valuation is vindicated by the Great American Group sale at $300 million. Marc Cohodes is a skilled short, but many of his claims were demonstrably false. For the last two years, shorting was the winner. Every source I have says it's a company run be good people, good in skill and character.
Excellent write-up!
RILY's baby bonds and preferred units are quite an interesting proposition. After the April drama, prefs (RILYP and RILYL) traded at nearly a 100% current yield.
For now, I am staying on the fence, but I may soon take a position.
Speaking of the preferred, that’s truly where the speculative action is. Check out RILYL and RILYP. I’ll play small ball on those kinds of asymmetries all day long…
What's amazing about the preferred, they can't go private or be acquired without settling them at par, or the debt being a liability of a stronger company. It has a ceiling of par plus cumulative divvy, but it also has a higher probability of a high return.