B. Riley Financial Inc., a diversified financial services provider based in Sawtelle, saw its shares lose more than half their value last week as the company released its preliminary second quarter earnings and disclosed it is under investigation by the Securities and Exchange Commission.

Closing with a share price of $16.95 on Aug. 9, prices fell to $8.02 by end of day Aug. 12 and sat at $5.04 as of Aug. 15.

Preliminary estimates revealed a net loss for the quarter which ended June 30 to be between $435 million and $475 million, according to a statement from B. Riley. 

Bryant Riley, the company’s chair and co-chief executive, attributed much of this loss to the company’s prior involvement with Franchise Group Inc., whose former Chief Executive Brian Kahn is being investigated for misconduct.

“Our second quarter results were negatively impacted by non-cash losses, the overwhelming majority of which relate to performance of our investment in Franchise Group Inc. and our Vintage Capital loan receivable, which is primarily collateralized by equity interests in FRG,” Riley said in a statement.

B. Riley also noted in its earnings report that it expects a non-cash markdown of between $330 million and $370 million due to its investment in FRG’s parent entity, Freedom VCM. 

In an Aug. 12 conference call, Riley noted that the subpoenas he received from the SEC “primarily relate to the company’s dealings with Brian Kahn,” adding that the company is fully cooperating with the investigation.

A spokesperson from B. Riley said the company has completed an internal review of this matter with the assistance of Sullivan & Cromwell LLP as outside counsel and a separate independent investigation with the assistance of Winston & Strawn LLP as independent legal counsel.

Riley discussed the results of the review in the Aug. 12 conference call.

“We are confident that the SEC will reach the same conclusion that our own internal investigation with the assistance of two separate law firms did that we had no involvement with or knowledge of any alleged misconduct concerning Brian Kahn or his affiliates,” Riley said.

Riley also announced the company is pausing its dividend to address outstanding debt, which according to the earnings report is approximately $2.2 billion. The company also reported about $1.1 billion in total cash and investments.

“While we have significant cash on the balance sheet, it’s important to understand the benefit (that) capital strength provides our operating businesses and our clients,” Riley said. “The decision to suspend our dividend will also help support other strategic decisions we view as a priority at this time.”

As of Aug. 15, B. Riley saw a market cap of $153 million, compared to $642 million at the end of March.

In its earnings report, the company stated its intentions to request a late filing of its final quarterly report to the SEC and that this report was not comprehensive but showed preliminary estimates and is subject to change.