B. Riley co-founder prepares bid valuing investment bank at $212 million after torrid week

(Reuters) -B. Riley Financial's co-founder and co-CEO, Bryant Riley, disclosed on Friday that he has proposed to buy the investment bank, in a dramatic end to a punishing week for its shares. Riley, who is also the largest shareholder with a 24% stake, has offered $7 each for the shares he does not currently own, in a deal that values the bank at $212 million.

The offer marks a 39% premium to the stock's last close. Shares rose 23% to $6.21 before the bell.

The stock has plunged 70% this week through Thursday's close, highlighting the extent of the turbulence the Los Angeles-based bank has faced since Monday, when it warned of a massive hit from its investment in Franchise Group (NASDAQ:FRG ).

The bank had participated in the management-led buyout of Franchise last year. Its dealings with Franchise's former CEO, Brian Kahn, attracted scrutiny from investors and regulators after Bloomberg News reported that he was a co-conspirator in a securities fraud involving Prophecy Asset Management.

Kahn has denied the allegation, saying he never knew that Prophecy was allegedly defrauding investors.

An external investigation and an internal review earlier this year cleared B. Riley of any wrongdoing.

"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," Riley said in a letter on Friday.

Riley said he would not proceed with the transaction unless he gets approval from a special committee of independent directors of the bank's board.

He has served as the bank's chairman and co-CEO since June 2014 and July 2018, respectively.

The bank has warned of a loss of between $435 million and $475 million for the quarter ended June, compared with a profit of $44 million reported a year earlier.

Source: Investing.com