.August 12, 2024 6:55 PM

B. Riley Financial (NASDAQ:RILY) saw its shares plummet by 51% after revealing a net loss of $435 million to $475 million for the second quarter, equating to $14 to $15 per share. The losses were mainly due to non-cash markdowns linked to underperforming investments in Franchise Group, Inc. (FRG) and Vintage Capital loan receivable.

Chairman Bryant Riley attributed the financial challenges to exposure to Franchise Group and issues related to former FRG CEO Brian Kahn’s alleged misconduct. Despite the setbacks, the problems were not directly related to B. Riley or FRG.

B. Riley is set to take a non-cash markdown of $330 million to $370 million for its investment in Freedom VCM, the parent company of FRG, and the Vintage Capital loan receivable. An additional $28 million impairment charge is expected for Targus goodwill, impacted by changing consumer spending habits, along with a $25 million valuation allowance for deferred income taxes.