B. Riley and Brian Kahn, 1997–2023: from client to take-private

analysisIn an interview published in October 2024 Bryant Riley said he met Brian Kahn in 1997, after Kahn had founded his own small firm, Kahn Capital Management, and that Kahn was a client to whom B. Riley offered stock research; for a decade or more after those early years, he said, he had little contact with Kahn beyond a few trades or meeting him at a conference. This is Riley's own account given to a newspaper, not a contemporaneous record of the client relationship, and Franchise Group's 2023 merger proxy and the class complaint as summarized by the federal court date the founding of Kahn Capital Management to 1998, a year after the meeting Riley describes. ^{1 2 3}

analysisThe class plaintiffs in the federal securities action against B. Riley Financial also describe the early relationship. As summarized in the court's order of December 12, 2025, their amended complaint alleges that Kahn, the founder of Vintage Capital Management, LLC (VCM), was one of the company's early clients, at first for brokerage services only; that in 2017 the company partnered with VCM to buy 37% of Liberty Tax, Inc.; and that in July 2019 the company and VCM acquired a controlling interest in Liberty Tax, named Kahn its chief executive and renamed it Franchise Group, Inc. These are allegations summarized by the court when ruling on a motion to dismiss, not findings of fact. ³

analysisA news-agency report of August 2024 described two later deals. It said that in 2018 Kahn sought to buy Rent-A-Center for $1.4 billion and that B. Riley agreed to underwrite the purchase in what Riley later described as the largest deal his firm had ever arranged, and that in December 2018 Rent-A-Center cancelled the deal and demanded a $126.5 million breakup fee, later cut to $92 million by the court; it added that in June 2022 Kahn bid for Kohl's Corp. at a valuation of $8 billion with Riley's assistance. This is a press account; the deal documents and the court decision are not among the records reviewed. ⁴

analysisRiley told the same newspaper in October 2024 that in 2018 Kahn came to him with the idea of buying into Liberty Tax, a franchise tax preparer, and using it to acquire other franchise businesses, and that Vintage and B. Riley took stakes in Liberty Tax, which acquired Buddy's and changed its name to Franchise Group, and that he took a board seat because his company held more than 10%. EDGAR records Franchise Group, Inc. (CIK 0001528930) as a Delaware corporation at an address in Delaware, Ohio, with no listed tickers or exchanges; its former names were Liberty Tax, Inc. (July 15, 2014 to September 19, 2019) and JTH Holding, Inc. (September 2, 2011 to July 9, 2014). ^{1 2}

analysisSEC filings place Riley and a Vintage partner on the Liberty Tax board from 2018. Riley's EDGAR owner record lists a report as director and 10% owner of Liberty Tax, Inc. dated September 3, 2018, and Andrew M. Laurence, a partner of Vintage Capital Management since 2010, has a director report for Liberty Tax dated the same day; FRG's 2023 merger proxy says Laurence was an FRG director from 2018 to 2021 and its executive vice president from 2019. B. Riley Financial's 2023 proxy statement says Riley served on the FRG board from September 2018 through March 2020. Its 2026 proxy statement instead describes that period as service on the board of Freedom VCM Holdings, LLC, FRG's indirect parent, and adds that he rejoined that board in August 2023 and resigned in June 2025 after Freedom VCM Holdings and certain affiliates filed for bankruptcy on November 3, 2024; the two proxy statements thus name different companies for the 2018–2020 seat. ^{3 4 5 6 7}

analysisIn October 2019 B. Riley FBR, Inc. was included in the "Vintage Group" of FRG's registration rights agreement. Amendment No. 2 of October 23, 2019 to that agreement, filed on EDGAR, defines the group as Tributum, L.P., Vintage Tributum LP, Vintage Capital Management, LLC, Samjor Family LP, Vintage RTO, L.P., Stefac LP, Brian Kahn and Lauren Kahn as tenants by the entirety, and B. Riley FBR, Inc., with their affiliates. Its holder schedule lists 1,000,000 FRG shares for B. Riley FBR, Inc. and 1,000,000 shares for Brian and Lauren Kahn as tenants by the entirety. ⁸

analysisRiley's departure from the FRG board in 2020 features in the class action. The December 12, 2025 order recounts the plaintiffs' allegation that on March 31, 2020, the day Prophecy Asset Management (see below) told investors its auditor had resigned and suspended redemptions, Riley resigned from FRG's board effective immediately. For the purposes of the motion to dismiss, the court inferred from that resignation, his alleged personal involvement in the buyout, its size and Kahn's importance to the company that Riley was at least aware of public allegations that Kahn had engaged in fraud. That is a pleading-stage inference drawn from the complaint's allegations; the court made no finding on the merits. ⁹

analysisThe class plaintiffs, as summarized by the court, allege that as of February 2020 VCM and its affiliates owned about 45.4% of FRG's common stock and the company and its affiliates about 13.2%; that as VCM built its stake the company made a series of margin loans to Kahn and his affiliated entities; that by early January 2023 Kahn and his spouse had pledged all their FRG stock as collateral for the company's loans; and that by mid-2023 the company had $154 million of loans outstanding to Kahn and affiliates. These are allegations summarized by the court, not findings of fact. ¹

analysisA trade-press report on the 2026 derivative litigation said that a July 2023 Nomura presentation revealed a series of undisclosed loans to Kahn, with principal balances reaching $154 million by mid-2023, and that B. Riley also lent $201 million to Kahn's investment firm, secured by Franchise Group shares. The lender presentation is not among the records reviewed, and B. Riley's own filings describe the VCM note on a different basis. In an October 2024 newspaper interview Riley said about half of the loan to Vintage was made to Kahn as he was establishing Franchise Group and buying up shares, with the rest stemming from the buyout. B. Riley's filings record that in February 2026 it collected $1.855 million from the sale of all of the collateral it held for the Vintage loan and expects no additional collections on that receivable. ^{2 3 4}

analysisFRG's merger proxy states that in December 2021 FRG's subsidiary W.S. Badcock Corporation entered into a master receivables purchase agreement with B. Riley Receivables, LLC, an indirect wholly owned B. Riley subsidiary, which bought Badcock's existing consumer credit receivables portfolio for $400 million in cash; FRG used the proceeds to repay part of its debt, and B. Riley affiliates continued to buy Badcock receivables from time to time until March 2023. ¹

analysisA second programme followed. B. Riley's 2025 annual report states that on September 23, 2022 B. Riley Receivables II, LLC, then a majority-owned subsidiary, entered into a second master receivables purchase agreement with Badcock and bought $168.4 million of consumer credit receivables, partly financed with a $148.2 million term loan; amendments in the first quarter of 2023 added $145.3 million of receivables. B. Riley recorded these purchases as loans receivable from Badcock collateralized by the consumer receivables, and FRG guaranteed Badcock's performance under the purchase and servicing agreements. ²

analysisThe class plaintiffs, as summarized by the court, put the total at $945 million of Badcock accounts receivable bought by the company's receivables subsidiary between December 2021 and March 2023, and allege that in March 2023 the company decided to stop buying them. These are allegations summarized on a motion to dismiss, not findings of fact. ³

analysisThe end of the receivables purchases and the take-private proposal came together. FRG's merger proxy recounts that in March 2023 B. Riley said it would fund Badcock receivables one final time for the first quarter of 2023 but not for the second quarter and beyond, and would prefer to explore acquiring all of FRG's equity rather than bear continued FRG balance-sheet risk. Kahn and Bryant Riley met in person on March 16 and 17, 2023, and on March 19, 2023 FRG received B. Riley's non-binding letter proposing a take-private at $30.00 per share in cash, subject among other things to management rolling over their equity, special-committee approval and approval by a majority of unaffiliated stockholders. ¹

analysisOn April 16, 2023 FRG's special committee allowed Kahn to pursue discussions about a possible acquisition, with B. Riley or other bidders, if he kept the committee informed. On April 17 Kahn and Vintage Capital Management disclosed in an amended Schedule 13D that they wished to discuss the transaction with B. Riley, subject to special-committee approval and a non-waivable majority-of-unaffiliated-stockholders condition, and on April 18 Kahn and his counsel at Willkie met by videoconference with B. Riley and its counsel. Between April 30 and May 9, 2023 B. Riley determined that, while it remained interested in financing a transaction, it would need to do so in a manner that would not result in it controlling FRG or consolidating it into its financial statements; the parties therefore determined that Kahn would control the surviving company from a governance perspective and might own a majority of its equity. FRG's chief restructuring officer gave the same account to the bankruptcy court in November 2024: Kahn and his affiliates took FRG private, financed in part with equity from investors including B. Riley Financial and affiliated entities and with debt from lenders including Irradiant Partners. ^{1 2}

analysisB. Riley gave two undertakings when the merger agreement was signed on May 10, 2023. Under an equity commitment letter with Freedom VCM Holdings and Freedom VCM, Inc., the merger parent, it committed to contribute $560.0 million in cash to Freedom VCM Holdings immediately before the merger, with the right to assign part of the commitment to affiliates, financing sources or other investors without being relieved of its obligation; Irradiant Partners LP and other institutions committed to a $475.0 million senior secured term loan for the merger. Concurrently, B. Riley gave FRG a limited guarantee of the payment obligations of the merger parent and merger subsidiary, including the reverse termination fee and certain reimbursements, up to $57.0 million, and, in the case of actual fraud or a wilful and material breach by them, of the full uncapped amount of their liability. ¹

analysisUnder a rollover agreement of the same date the "Rollover Stockholders" (Brian R. Kahn, Vintage Opportunity Partners, L.P., Brian Kahn and Lauren Kahn as joint tenants by the entirety, and Andrew Laurence) committed to contribute 12,804,832 FRG shares, equivalent to $384.0 million at $30.00 per share, to Freedom VCM Holdings in exchange for common membership interests: 2,154,807 shares listed for Kahn ($64.6 million), 2,500,000 for Vintage Opportunity Partners ($75.0 million), 7,576,543 for the Kahns jointly ($227.3 million) and 573,482 for Laurence ($17.2 million), which add up to $384.1 million against the proxy's stated total; the same holders entered into a voting agreement with the merger parent that day. The $64.6 million value recurs in B. Riley's own reports. Its 2024 annual report describes FRG shares worth $64.6 million at the deal price, held of record by B. Riley Securities, over which Kahn had sole voting and dispositive power under an advisory agreement and which were rolled over into Freedom VCM equity at closing, and its 2025 annual report counts a $64.6 million roll-over of FRG shares within its subsidiaries' $281.1 million Freedom VCM interest. The matching values are consistent with the same shares being described in each record, but none of the records states this expressly. ^{1 2 3}

analysisThe deal documents also gave B. Riley a defined role on the buyer side. The rollover agreement, filed as an annex to FRG's merger proxy, provides that B. Riley Financial, Inc. "will be responsible for making all decisions and taking (or causing to take) all actions on behalf of Topco" (Freedom VCM Holdings), under Section 2(b) of an Interim Investors Agreement of the same date among Brian R. Kahn, B. Riley and other parties; the provision applies for the purposes of the rollover agreement, and the Interim Investors Agreement itself is not among the records reviewed. The merger proxy defines the "Consortium Members" as the Freedom entities, the "Kahn Parties" (Brian Kahn, Brian Kahn and Lauren Kahn as joint tenants by the entirety, Vintage Capital Management LLC and Vintage Opportunity Partners, L.P.), B. Riley, Bryant R. Riley and Andrew Laurence. B. Riley Financial, Inc., as "Guarantor", and Bryant R. Riley were among the persons filing the final Schedule 13E-3 amendment of August 21, 2023, together with FRG, the Freedom entities, the Kahn Parties, Laurence and other FRG managers. ^{1 4}

analysisOn August 21, 2023 FRG filed a certificate of merger in Delaware and became a wholly owned subsidiary of Freedom VCM, Inc.; each FRG common share other than excluded shares was converted into the right to receive $30.00 in cash. Shares owned by Bryant Riley, B. Riley or any wholly owned B. Riley subsidiary were excluded from the cash conversion, as were shares rolled over under the rollover agreement and additional rollover agreements of about August 7 and August 14, 2023. Section 16 reports dated the closing day show several participants' FRG holdings reduced to zero: Riley sold 1,804 FRG shares; Thomas J. Kelleher's indirect 13,768 shares, first reported on a Form 3 dated August 17, 2023, were sold; Randall E. Paulson, a B. Riley director, filed a Form 3 for 40,000 FRG shares and a Form 4 disposing of all of them; and Kahn and Andrew M. Laurence reported dispositions coded "D-Return" leaving no direct holdings. Paulson's EDGAR owner record also lists a 10% owner report on FRG dated August 10, 2023; the EDGAR tables record the reported transactions and designations but do not explain that designation. ^{1 2 3 4 5 6 7}

analysisB. Riley's 2025 annual report describes the resulting positions. At closing its subsidiaries held a $281.1 million equity interest in Freedom VCM Holdings ($216.5 million bought in the transaction and a $64.6 million roll-over of FRG shares), representing a 31% voting interest and board representation; Freedom VCM managers exchanged their FRG equity for a combined 35% voting interest, of which Kahn, his spouse and one of his affiliates held 32%; and B. Riley held a first-priority security interest in a 25% equity interest of Kahn in Freedom VCM securing the loan to a Kahn affiliate. Its 2024 annual report adds that at the closing it terminated the investment advisory agreement under which Kahn, as financial advisor, had sole power to vote or dispose of the FRG shares held of record by B. Riley Securities, Inc.; Kahn's rights ended, the shares were rolled over into Freedom VCM equity, and the $20.9 million Kahn owed under the agreement was added to the amended and restated VCM note. ^{8 9}

analysisThe FRG Litigation Trust's complaint of August 18, 2026 in the Delaware Court of Chancery (C.A. No. 2026-1076) retells the relationship. It alleges that beginning in 2018 Vintage and B. Riley Financial jointly acquired control of Liberty Tax and placed their designees on its board; that in 2019, as part of the Sears Hometown acquisition, B. Riley Financial bought 1 million FRG shares for $12.0 million; that it financed FRG's $700 million acquisition of Pet Supplies Plus in 2021; and that after selling a first receivables tranche to B. Riley Receivables, LLC for about $400 million, Badcock entered into a second purchase agreement with B. Riley Receivables II, LLC in September 2022. On lending, the complaint alleges an amended and restated and an additional secured promissory note between Vintage and B. Riley Financial dated January 3, 2020; on April 24, 2020, a pledge by Kahn and his spouse of about 7.1 million FRG shares as collateral for B. Riley Financial loans; a $36 million second-lien loan to Vintage from B. Riley Commercial Capital, LLC on June 25, 2021, amended on August 9, 2023 to add $19,182,069.94; and a first-lien B. Riley loan that had reached $76,676,984 by December 28, 2022. At the closing, it alleges, B. Riley Financial entered into an amendment to an equity fee letter providing for a $16.5 million payment to it, became entitled to $20,910,666.87 on the termination of the investment advisory agreement between Vintage and B. Riley Securities, Inc., and with other holders sold B. Riley Receivables II, LLC to an affiliate of Freedom TopCo for a $58.9 million note; Vintage gave B. Riley Financial a note secured by Topco units and personal guarantees of Brian and Lauren Kahn, who also granted B. Riley Financial security over certain personal assets, and Kahn, Laurence and Bryant Riley became directors of the holding-company debtors. The complaint also quotes an August 7, 2023 letter agreement stating that 5,061,255 FRG shares pledged by the Kahns were held in their account at B. Riley Wealth Management, Inc. subject to a control agreement in favour of B. Riley and its affiliates. None of these allegations has been adjudicated. B. Riley's own filings describe the amended and restated VCM note of August 21, 2023 and its collateral, and its annual reports separately record the $20.9 million owed by Kahn under the terminated advisory agreement and the $58.9 million note received for B. Riley Receivables II. No answer by BRC, its subsidiaries or Bryant Riley to the Trust's complaint appears in the records reviewed. In its quarterly report dated August 6, 2026, twelve days before the complaint was filed, BRC stated that it faced the risk of unasserted claims relating to Kahn and its investment in Freedom Holdings and that, if such claims were made, it believed it had valid defenses and any such claim would be without merit. Separately, BRC states that its Audit Committee review and an independent investigation found that the company and its executives, including Riley, had no involvement with, or knowledge of, any alleged misconduct concerning Kahn or his affiliates. ^{1 2}

analysisB. Riley states that in November 2023, after the take-private had closed, it learned from news reports that Kahn had been identified as an unindicted co-conspirator in criminal and civil securities-fraud charges against an executive of an unrelated hedge fund, Prophecy Asset Management, whose co-founder John Hughes pleaded guilty on November 2, 2023. B. Riley states that it had no involvement with, or knowledge of, any of the alleged misconduct concerning that fund, Kahn or his affiliates, and that each separate review and investigation by its Audit Committee confirmed this; after Hughes's plea Kahn said in a statement reported by the press that at no time did he know that Prophecy or its principals were allegedly defrauding investors, nor did he conspire in any fraud. Kahn was charged in November 2025 and pleaded guilty on December 10, 2025 to one count of conspiracy to commit securities fraud. ^{1 2 3 4}

analysisIn the October 2024 interview Riley said he was friendly with Kahn but never considered him more than a business associate, that he personally knew nothing about what happened at Prophecy Asset Management, and that he regretted the forceful statement he had made defending Kahn on the day in November 2023 when Prophecy's co-founder pleaded guilty; on B. Riley's conference call that day Riley had said of Kahn's profession of innocence, "That's good enough for me." These are Riley's statements as reported by a newspaper. Kahn later pleaded guilty to conspiracy to commit securities fraud. ⁴