B. Riley is a diversified financial services company with a collection of interesting and complementary businesses. Operating with 2200 employees for 27 years

Management Confidence in the Stock:

• It's a dividend machine, yielding more than 6% across its history. But it also paid several special dividends. End of 2023 the board declared regular quarterly dividend of $1.00 per share; authorized $50 million annual share repurchase plan that it can utilise at anytime (The company has $34m still available at quarter end). RILY's current annual dividend yield is 11.6%.
• Insiders own a large percentage of the shares outstanding, about 113,092,217 shares! They regular purchase more and have initiated buy backs in the past. Insider have bought 387,946,248 shares since 2019 for a net increase of 150,562,33 shares.

Fundamentals:

• Market cap is currently <=.4x revenue (valuation low compared to peers trading at 1.3-2.3x); revenue is also potentially going to increase given recent acquisitions.
• Assets under management totaled $25.8 billion at the end of March with a market cap of just $930.07M
• Full year ended December 31, 2023: Total revenues increased 52% to $1.65 billion in 2023, up from $1.08 billion in 2022
• Operating revenues increased 25% to $1.63 billion in 2023, up from $1.31 billion in 2022
• Operating adjusted EBITDA of $368 million compared to $394 million in the prior year
• Total adjusted EBITDA increased to $240 million in 2023, up from $32 million in 2022
• Capital Markets segment revenues increased 75% to $575 million in 2023, up from $328 million in 2022. 
• Auction and Liquidation revenues increased 39% to $103 million in 2023, up from $74 million in 2022
• Financial Consulting maintained strong steady growth throughout 2023. Segment revenues increased 36% to $134 million in 2023, up from $99 million in 2022
• Communications segment revenues increased 43% to $338 million in 2023, up from $236 million
• Dividend income related to securities owned increased 33% to $48 million in 2023, up from $36 million in 2022.
• The company previously announced a potential sale of Great American Group. Q-1 earnings for that segment increased to $35m of EBITDA, so at 10-12x a potential sale is looking like $350-$420m.

The Short Thesis and Rebuttal:

• The majority of the 15M shares held by institutions are held by funds like Blackrock. There is currently over 8M shares sold short about 52% of the float according to FINTEL (down from 80%+ in March).  
• Shorted by controversial vocal short seller figureMarc Cohodes (lost millions shorting meme stocks) due to legal concerns (since audited and vindicated) and late filing of 10K (Clean audit from reputable firm Marcum)
• Short selling, an oft-misunderstood practice, often plays a vital role in market strengthening. RILY has withstood the short thesis. It had the largest short interest on the Market in 2023. From a year high of $59 in July 2023 the stock was near $20 in November 2023. With the stock cleared of any legal issues and filling an audited 10K this month shares are now sitting at $30.70, still over-shorted.
• Its EV-MV ratio is high but RILY faces just $25 million in debt maturing in 2024 as of the end of its first quarter with $146.4 million of debt maturing in 2025 comfortably covered by cash ($1.61 Billion in Cash and Investments).

Trivia (This is not a meme stock with failing business model (brick and mortar) but interesting nonetheless)

• Steve Cohen of point72 of Melvin Capital shorts fame recently declared bought shares
• Jeff Amazon (The original investor behind the 2021 meme-stock craze) posted regarding the stock

My, likely flawed, valuation:

Using the Discounted Cash Flow (DCF) method involves determining the present value of a company or asset by considering its anticipated future earnings. Put simply, assets that generate consistent and substantial cash flows are deemed more valuable compared to those with irregular and lower cash flows. This evaluation incorporates several factors:

1. Historical Performance: Utilizing regression models to forecast future values based on past performance.
2. Industry Benchmarks: Incorporating industry norms to gauge how comparable companies have historically performed.
3. Discount Rate Selection: Determining the appropriate discount rate, using Weighted Average Cost of Capital (WACC). This entails analyzing various variables like risk-free rates, capital structures, interest coverage ratios, and risk premiums to arrive at a suitable discount rate.

As a bullish bet I am looking at ~$77 per share (38-111 90% confidence interval)

As always do your own research. I am neither long nor short the stock