Babcock & Wilcox: BRC's stake, guarantees and the Base Electron deal

analysisBabcock & Wilcox Enterprises, Inc. (B&W) lists BRC Group Holdings as its largest shareholder. Its 2026 proxy statement, relying on BRC's Schedule 13D/A of February 13, 2026, gives BRC 27,446,522 shares, or 20.4%: 15,573,362 held by B. Riley Securities, Inc., an indirect majority-owned subsidiary, and 11,873,160 held by BRF Investments, LLC, a wholly owned subsidiary. The proxy reports Bryant R. Riley as beneficial owner of 27,664,353 shares, a figure that includes the shares attributed to BRC. ¹

analysisBRC's own reports give its voting interest in B&W as 29.1% at December 31, 2024, 25% at December 31, 2025 and 19% at June 30, 2026, and BRC accounts for the investment under the fair value option. In BRC's portfolio at June 30, 2026 the B&W common stock was the largest listed holding, valued at $387.0 million against $174.0 million at December 31, 2025. ^{2 3}

analysisB&W's quarterly report for the period ended March 31, 2026 states that, based on Schedule 13D filings, B. Riley beneficially owned about 20% of B&W's common stock at that date, and that under an investor rights agreement entered into in April 2019 B. Riley may nominate one member of B&W's board and holds pre-emptive rights on certain future issuances of B&W equity. BRC's EDGAR owner page lists a report it filed in 2019 as a holder of more than 10% of B&W; the page shows the report's date, not how long the holding lasted or whether it continues. According to BRC's 2023 proxy statement, Bryant Riley was himself a B&W director from April 2019 to September 2020, and Brian Kahn's EDGAR owner record lists a B&W report as director and 10% owner dated August 13, 2019. ^{4 5 6 7}

analysisA short seller's report on B&W, whose publisher disclosed a short position in B&W securities, gives an account of how these ties began: in 2018 B&W raised capital through a rights offering involving B. Riley Financial and Vintage Capital Management, after which B. Riley-affiliated parties held about 30% of B&W's equity; Kenneth Young, then President of B. Riley, became B&W's chief executive in November 2018 under a consulting agreement; and a derivative action filed in Delaware against Young, B. Riley and Vintage, alleging breach of fiduciary duty and unjust enrichment, settled in 2023 for $4.75 million. The derivative complaint and settlement papers are not among the retained records, so the court, case number, settlement terms and any admission are not established here. Young's consulting arrangement, by contrast, is documented in BRC's and B&W's proxy statements. ¹

analysisKenneth M. Young, then BRC's President, became B&W's chief executive officer in November 2018, and until September 20, 2024 he served under a consulting agreement between B&W and BRPI Executive Consulting, LLC, a B. Riley affiliate. BRC's proxy statement puts the fee at $750,000 a year under an agreement extended through December 31, 2028, and B&W states that it paid BRPI Executive Consulting a $1,000,000 retention bonus in 2022. When Young resigned as BRC's President on September 20, 2024 the arrangement with B&W ended, and he entered into a one-year consulting agreement with BRC at $250,000 a year, which expired on September 20, 2025. ^{2 3}

analysisBRC has also supported B&W's financing. On June 30, 2021 it agreed to guarantee up to $110,000,000 of obligations that B&W may owe to providers of cash collateral pledged in connection with B&W's debt financing, the "B. Riley Guaranty", for which B&W paid it $935,000 a year. On December 22, 2021 BRC entered into a general agreement of indemnity in favour of one of B&W's sureties, agreeing to indemnify the surety against a default by B&W under a €30 million payment and performance bond issued for a B&W construction project; B&W paid BRC fees of $1,694,000 on January 20, 2022. The bond amount was reduced as contractual performance obligations were met, and BRC's indemnity obligation was €5 million at June 30, 2026. ^{1 2}

analysisOn January 18, 2024 BRC guaranteed certain obligations of B&W under B&W's credit agreement of the same date with Axos Bank as administrative agent, with BRC's exposure for principal and unreimbursed letter-of-credit obligations capped at $150,000,000. B&W agreed to pay BRC a fee of 2.00% of the revolving commitments, which B&W's own report describes as an annual fee of about $3.0 million. BRC's obligations were suspended on June 18, 2025 until January 1, 2027, and the guarantee was terminated on February 25, 2026. ^{3 4}

analysisBRC earned underwriting, financial advisory and other fees from B&W's capital-raising activities of $0 in 2023, $3,849,648 in 2024 and $8,009,995 in 2025, and $12.5 million in the first six months of 2026, compared with $3.8 million in the same period of 2025. B&W's first-quarter 2026 report states that in April 2024 and November 2025 B&W entered into sales agreements with B. Riley, among others, for at-the-market sales of B&W common stock, with B. Riley entitled to 3.0% of the gross proceeds of shares sold through it as agent, and that in the first quarter of 2026 it engaged B. Riley as financial adviser for a cash fee of 3.0% of any qualified debt financing, with $5.0 million accrued at March 31, 2026. B&W's 2026 proxy statement describes a financial advisory agreement under which B. Riley Securities, Inc. receives a cash fee of $500,000 and 3% of the value of any completed financing. ^{1 2 3 4}

analysisThe same proxy statement asks B&W's shareholders to ratify the appointment of BDO USA, P.C. as B&W's independent registered public accounting firm; BDO USA, P.C. is also the auditor named in BRC's annual report for 2025. ^{4 5}

analysisB&W's first-quarter 2026 report sets out how the contract came about. In November 2025 B&W entered into a limited notice to proceed with Applied Digital for four 300-megawatt natural-gas power plants to supply an AI factory, and in connection with it issued Applied Digital 0.5 million shares and warrants. Effective February 26, 2026 B&W signed a definitive agreement for the project with Base Electron, which the report calls "an IPP backed by Applied Digital", that is, an independent power producer, for total consideration of $2.4 billion, of which $2.0 billion is variable charges, with operation targeted for 2029. B&W attributed $31.0 million of its first-quarter 2026 revenue increase to the Base Electron project. ¹

analysisApplied Digital's filings describe its side of the arrangement. Applied Digital unconditionally guaranteed Base Electron's performance under a Design-Build Agreement of February 26, 2026 between Base Electron and The Babcock & Wilcox Company for a power plant of about 1.2 GW, with a right to end the guarantee on, among other events, payment of a termination fee of $50 million if paid by August 1, 2026, or $100 million; as partial consideration Base Electron issued Applied Digital about 10% of its equity, valued at $2.0 million. On March 18, 2026 Applied Digital assigned to Base Electron its right to buy 5,230,000 B&W shares, and B&W issued a warrant for those shares directly to Base Electron. Applied Digital's annual report for the year ended May 31, 2026 states that the guarantee was terminated on May 29, 2026, effective on payment of $37.0 million by Applied Digital on behalf of Base Electron, an amount added to a promissory note owed by Base Electron to Applied Digital. ^{2 3}

analysisApplied Digital describes Base Electron as a Nevada corporation and independent power producer "owned and managed by a combination of third parties, as well as certain officers and directors of the Company acting in their individual capacities", the Company being Applied Digital; the passages do not name the third parties. Applied Digital's annual report lists Base Electron among entities with which its officers or directors may have relationships, notes that its chief executive Wes Cummins holds over 7% of its stock, and requires Audit Committee approval of transactions over $120,000 in which officers, directors or 5% holders have an interest. A commercial mirror of the Nevada business register lists Base Electron Corp. as an active Nevada domestic corporation, number E53945222025-7, with a registered agent in Carson City; its filing list shows an amendment after issuance of stock on February 26, 2026, an amended list on March 18, 2026, three office corrections on March 19, 2026 and further amended lists on April 14 and August 18, 2026. The content of these filings is not shown. ^{1 2 3}

analysisOn March 12, 2026 a short seller that stated it was short B&W published a report asserting that B&W's counterparty was not Applied Digital but "a newly minted entity backed by RILY called Base Electron", that Base Electron had the same address as BRC's headquarters and that Bryant Riley was a director. According to a later class-action complaint, the report suggested that the deal's purpose might be to provide exit liquidity for BRC, and B&W's share price fell $1.71, or 11.59%, to $13.05 that day. These are assertions of a party positioned to profit from a fall in B&W's share price, later repeated by plaintiffs, and no court has assessed them. B&W and Applied Digital describe Base Electron as an independent power producer backed by Applied Digital and owned by third parties and certain Applied Digital officers and directors, without naming BRC or Bryant Riley. BRC's 2025 annual report refers generally to "continuing unfounded allegations by short sellers and others" in connection with matters since November 2023; no response by BRC or Bryant Riley to the Base Electron assertions was found in the retained records. ^{4 5 6 7}

analysisTwo short sellers' reports rely partly on reproduced register records. The March 2026 report reproduces an image of a Nevada register entry for BASE ELECTRON CORP., entity number E53945222025-7, incorporated on December 23, 2025, listing as directors from that date Bryant Riley and Wes Cummins, each at 11100 Santa Monica Blvd., Suite 800, Los Angeles, the business address BRC gives in its SEC filings, and a third individual. A second short seller's report on B&W states that Base Electron shared an address with B. Riley in Los Angeles when incorporated the previous December and that Bryant Riley was listed as a director until March 2026; it reproduces a register record updated on March 19, 2026 listing Wes Cummins as President and three other officers and directors, all at a Dallas address that Base Electron shares with Applied Digital. That publisher also disclosed a short position in B&W. Neither image was checked against the Nevada register itself; the first image's entity number matches the register mirror, which shows filings in mid-March 2026 but not their content. Riley's directorship of Base Electron therefore rests on these reproduced records and on the plaintiffs' allegations; the filings of B&W and Applied Digital do not name him. ^{6 8 9}

analysisA securities class action filed on April 14, 2026 in the U.S. District Court for the Northern District of Ohio (Case No. 5:26-cv-00886) against Babcock & Wilcox Enterprises, its Chairman and CEO Kenneth M. Young and its CFO Cameron Frymyer seeks damages under Sections 10(b) and 20(a) of the Securities Exchange Act for purchasers of B&W securities between November 5, 2025 and March 11, 2026. It alleges that B&W failed to disclose the connection between its $2.4 billion counterparty Base Electron and B&W's largest shareholder, BRC, and BRC's Co-CEO Bryant Riley. BRC and Bryant Riley are not named as defendants. On August 3, 2026 the court denied a shareholder's motion to be appointed lead plaintiff and lifted the stay of case deadlines; no ruling on the merits appears in the docket copy, which was current to September 2026. ^{1 2}

analysisThe plaintiffs and their lawyers allege that BRC "stood on both sides" of the Base Electron contract: that Bryant Riley was a Base Electron director from its founding on December 23, 2025 and its registered address matched BRC's headquarters; that on November 4, 2025 B&W entered into a sales agreement with BRC and another broker for an at-the-market offering of up to $200 million of B&W stock; and that on February 11, 2026 BRC sold its entire directly held B&W position for about $10.4 million at $9 a share, 140% above the price before the notice to proceed was announced. These allegations of the plaintiffs, also made in a plaintiffs' law-firm release, have not been adjudicated, and BRC and Riley are not defendants. The filings on the sale identify a different seller. A joint Form 4 filed on February 13, 2026 by BRC, BRF Investments, LLC, B. Riley Securities, Inc. and Bryant R. Riley reports the sale on February 11, 2026 of 1,155,382 B&W shares from direct holdings, leaving none held directly; its footnote reads: "Represents shares held directly by Bryant R. Riley that were sold to satisfy repayment of debt". After the sale BRC's indirect holdings of 11,873,160 and 15,573,362 B&W shares remained. Under a stock purchase agreement dated and effective February 11, 2026, Bryant Riley, jointly with his spouse, and a Riley family trust sold the 1,155,382 shares to AFOB FIP MS, LLC, a Delaware limited liability company managed by AFO Blackberry LLC, for $10,398,438 in cash. The sellers represented that no consent was required other than approval by BRC's Audit Committee, and the buyer acknowledged that the sellers would amend their Schedule 13D and file a Form 4 because of their affiliate status with BRC. ^{1 2 3 4 5}

analysisRiley's own Schedule 13D on BRC explains where the money went. In Amendment No. 5, with an event date of February 13, 2026, he reported that he used the proceeds of a private sale of B&W shares to repay $10,398,438 of his revolving credit line with Axos Bank, whose limit was $21,407,944 with maturity on April 1, 2026 under a March 27, 2025 amendment; the repayment released 53.7% of the BRC shares pledged to Axos, 3,122,537 shares. He reported beneficial ownership of 6,985,856 BRC shares, 22.4% of 31,218,670 outstanding. ⁶