Why Is B. Riley Financial Stock Jumping Today?

B. Riley Financial, Inc. RILY shares are trading higher after the company, in a 13D filing, disclosed that co-founder Bryant R. Riley wrote a letter to the Board of Directors with a proposal to acquire all shares of common stock that he does not own for a price of $7 per share.

Riley is the largest stockholder of B. Riley Financial, owning approximately 24% of the company’s outstanding common stock. This valuation represents about a 40% premium over the previous closing price.

The company went public at $5 per share through a 2014 merger with Great American Group. Since then, it has returned over $20 per share to shareholders through dividends and buybacks, and generated over $1.1 billion in operating EBITDA over the past three years.

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“Notwithstanding our history of strong execution and value creation, the current public company paradigm requires us to focus on short-term objectives and allocate unnecessary attention and time on constituencies who are not aligned with the owners of the business,” the letter read.

Riley said he plans on continuing to report financials to the SEC, and the company’s bonds will continue to be publicly traded.

“It is possible that I will continue to list on a secondary exchange if there are shareholders that would like to participate in this transaction,” Riley added.

This decision follows the company’s recent suspension of its dividend, announcement of its largest quarterly loss, and confirmation of an SEC investigation, reported Bloomberg.

Riley, also the chairman and co-chief executive officer of the company, plans to finance the transaction with debt and, potentially, equity from third-party capital providers. The proposed transaction would not be subject to a financing condition.

Price Action: RILY shares are trading higher by 21.9% to $6.14 at last check Friday.

Photo via Shutterstock

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