B. Riley Financial, Inc. RILY
RILY tacitly admitted it breached covenants on $455M of credit lines while a deteriorating loan book and an undisclosed insider — Daniel Asher — quietly props up its share register and dividend.
Thesis
Wolfpack's follow-up report argues that B. Riley Financial (RILY) tacitly admitted breaching the covenants of its $380M Nomura and $75M BRPAC credit agreements by silently dropping the standard compliance assurance from its Q3 2022 10-Q. The firm's $527M loan book is deteriorating fast: borrower Sorrento Therapeutics just filed Chapter 11 on a $41M loan, Exela Technologies ($75M, ~36% one-year default risk) is on the brink, and Core Scientific and Greenridge are in distress. Wolfpack also alleges Bryant Riley's 20% stake is reinforced by a third-largest, undisclosed shareholder — Daniel Asher (8.65%) — who controls his stake through an 'informal, unwritten' handshake agreement and has 13 FINRA regulatory actions. Asher's well-timed share purchases helped break a logjam in the National Holdings acquisition that RILY then used to push its proprietary Baby Bonds onto retail wealth-management clients.
SCQA
B. Riley Financial is a small-cap financial-services holding company whose investment-bank, wealth-management and proprietary-loan-book arms are funded by Baby Bonds sold to retail and supported by a 20%-owner CEO Bryant Riley.
Q3 2022 10-Q quietly dropped the covenant-compliance assurance for $455M of credit lines, the loan book is collapsing (Sorrento Ch.11, Exela near default), and an undisclosed 8.65% insider — Daniel Asher — is tied to Bryant Riley by a handshake agreement.
Wolfpack demands that RILY disclose covenant status, loan-book detail, the funding source of the Q1 2023 dividend, recovery expectations on the SRNE and XELA loans, and the true description of the Targus consideration.
If management cannot answer, Baby Bond holders likely face a steep haircut without cross-default protections, the dividend is unsustainable, and the equity is materially overvalued at $43.76 / $1.25B market cap.
The three reasons
- 1
RILY quietly dropped covenant-compliance language for $380M Nomura and $75M BRPAC loans in Q3 2022 10-Q
- 2
Loan book deteriorating — Sorrento ($41M) just filed Ch.11; Exela ($75M), Core Scientific, Greenridge in distress
- 3
Undisclosed 8.65% holder Daniel Asher tied to Bryant Riley via handshake deal and helped force National deal
Primary demands
- Disclose whether RILY is in full compliance with its Nomura and BRPAC credit agreements
- Disclose details of the loan book and recovery prospects on the SRNE and XELA loans
- Clarify how the Q1 2023 dividend will be funded given covenant and loan-book stress
- Explain the inconsistent press-release vs. 8-K descriptions of the Targus deal financing
KPIs cited
Pattern membership
Composition what's on the 11 slides
Slide gallery ·
Notes
Follow-up Wolfpack short report on RILY (prior report referenced; this one triggered by SRNE Ch.11 filing one day before publication). Word-doc / Times Roman body style with annotated screenshots of 10-Q diff, Bloomberg ownership screen, FINRA BrokerCheck and SEC filings as evidence — distinctive forensic-evidence layout but not a designed deck. The CFO quote (Phillip Ahn, p.8) about wealth-management churn is used as a contradiction. The 'Net Issuance of Senior Notes' chart on p.8 is an event-anchored before/after but not the activist's own counterfactual, so uses_before_after_framing kept false. No price target or formal valuation framework — argument is qualitative/forensic rather than quantitative. Wolfpack discloses it may be long, short or neutral in the financial disclaimer (boilerplate). RILY collapsed in 2024; this report aged well.