As I continue to buy more shares in RILY and FRG, I continue to examine over and over how they have behaved during the difficult times in the economy. In examining what RILY’s CEO said immediately post COVID (Q1-2020 earnings), a number of positive themes emerge in my own opinion:
Over the course of our 23-year history, we have successfully managed through prior periods of extreme marketdislocation. While this is obviously unique from previous downturns, we feel our business is well positioned to come out stronger on the other side. We have learned from experience and have intentionally built our platform to withstand severe market shocks through the diversity of our businesses.
We call ourselves a platform because we view the company in 2 parts: with the operating side of our business, which performs services for our clients and generates cash flow for the company; and then we have our proprietary investments, where — which are investment ideas and opportunities sourced from our platform.
In spite of current volatility in our investments, these are all business opportunities which have contributed significant revenue for our platform. Revenues generated from these investments in prior quarters partially offset the unrealized loss, and importantly, there is no margin balance in any of these positions. This affords us the opportunity to make prudent investment decisions and not face pressure to sell in market values as well. In fact,the only meaningful realized trade during the quarter was the unwinding of a market hedge that we’ve put ontowards the end of last year that resulted in a $17 million gain.
As we look ahead, we have a balance of assets that continue to generate strong cash flow for B. Riley. In fact, a number of our businesses stand a benefit during countercyclical markets. This includes our B. Riley FBR corporate restructuring team, our GlassRatner bankruptcy and litigation advisory group, and our Great AmericanGroup retail liquidation division. We also believe and have begun to see a need for companies to raise capital through debt and/or equity and expect our capital markets group to be a beneficiary of this need for capital. In recent weeks, we have won a number of significant restructuring assignments and retail liquidation projects, and our pipeline for new opportunities is robust.
A key measure of our success will always be our ability to deliver shareholder value. During the quarter, inaddition to paying our quarterly dividend, we repurchased over 1 million shares, including a large block of sharestotaling 880,000 from an existing shareholder prior to the COVID-19 downturn. We also bought back some of our bonds, and our Board and management also continued to make open market purchases, which demonstrates continued confidence in the company. As we look ahead, we will continue to maintain tight discipline with our balance sheet, however, we will continue to be aggressive. Over our history, we have found that marketdisruption creates opportunities, and we intend to continue to be aggressive in pursuing these opportunities.With over $124 million of cash and over $775 million in cash and investments, strong operational cash flow andno significant principal payments due until mid-2023, we believe that we will have ample liquidity to support thebusiness through this uncertain time, and we will continue to leverage our balance sheet and to create moreopportunities, which not only benefit us, but also support our partners and our clients.