B Riley stock surges after external probe clears executives of suspected misconduct

(Reuters) -B Riley Financial's stock rallied 60% and helped its market value cross $1 billion for the first time since November, after the investment bank said on Wednesday that an external review had cleared its executives of misconduct allegations.

The investigation confirmed findings of an internal review B Riley disclosed in February, which also found no involvement of the company or its executives in the alleged wrongdoing.

The company filed its long-delayed annual report with the U.S. Securities and Exchange Commission on Wednesday after missing the deadline in February.

Its shares were last trading at $33.48, valuing the company at $1.03 billion compared with $664.3 million on Tuesday.

B Riley's investment in Vitamin Shoppe-owner Franchise Group, which was taken private in a management-led buyout in 2023, had invited scrutiny.

Bloomberg News reported in November that Franchise Group's former CEO, Brian Kahn, was a co-conspirator in a securities fraud involving Prophecy Asset Management.

Kahn has denied the allegations made in the report, saying he never knew that Prophecy Asset was allegedly defrauding investors.

However, the report allowed B Riley's critics, including Wolfpack Research that shorted it last year, to renew their attacks on the company.

In the annual report on Wednesday, B Riley revised its net loss available to common shareholders to $108 million for the year ended Dec. 31, bigger than the $86.4 million preliminary loss disclosed earlier.

The wider loss was primarily due to some of its investments not related to Franchise Group, the company said.

(Reporting by Niket Nishant in Bengaluru; Editing by Savio D'Souza, Anil D'Silva and Shounak Dasgupta)