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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended
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Sep. 30, 2024
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Principles of Consolidation and Basis of Presentation The condensed consolidated financial statements include the accounts of B. Riley Financial, Inc. and its wholly owned and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated upon consolidation. Certain prior-year amounts have also been reclassified to conform to the current-year’s presentation as a result of discontinued operations, see Notes 1 and 4. The Company consolidates all entities that it controls through a majority voting interest. In addition, the Company performs an analysis to determine whether its variable interest or interests give it a controlling financial interest in a variable interest entity (“VIE”) including ongoing reassessments of whether it is the primary beneficiary of a VIE. See Note 2(n) for further discussion. The condensed consolidated financial statements have been prepared by the Company, without audit, pursuant to interim financial reporting guidelines and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the periods presented have been included. These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 24, 2024. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods. (b) Use of Estimates The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expense during the reporting period. Estimates are used when accounting for certain items such as valuation of securities, allowance for credit losses, the fair value of loans receivables, intangible assets and goodwill, share based arrangements, contingent consideration, accounting for income tax valuation allowances, and sales returns and allowances. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ. (c) Interest Expense — Securities Lending Activities Interest expense from securities lending activities is included in operating expenses related to operations in the Capital Markets segment. Interest expense from securities lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled $6,359 and $38,368 during the three months ended September 30, 2024 and 2023, respectively, and $65,055 and $106,572 during the nine months ended September 30, 2024 and 2023, respectively. (d) Concentration of Risk Revenues in the Capital Markets, Financial Consulting, Wealth Management, and Communications segments are primarily generated in the United States. Revenues in the Consumer Products segment are primarily generated in the United States, Canada, and Europe. The Company maintains cash in various federally insured banking institutions. The account balances at each institution periodically exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insurance coverage, and as a result, there is a concentration of credit risk related to amounts in excess of FDIC insurance coverage. The Company has not experienced any losses in such accounts. On December 18, 2023, the Company loaned $108,000 to Conn’s Inc. (“Conn’s”) as more fully described in Note 20 under the Term Loan and Security Agreement, dated as of December 18, 2023 (the “Conn’s Term Loan”), among Conn’s, W.S. Badcock LLC ("WS Badcock"), as borrowers, and an affiliate of the Company, as administrative agent, collateral agent, and lender. On February 14, 2024, the Company collected $15,000 of principal payments which reduced the loan balance to $93,000. The fair value of the Conn’s loan receivable was $63,705 at September 30, 2024. This loan combined with two other existing loans receivable with a fair value of $12,451 and $62,808 as of September 30, 2024 and December 31, 2023, respectively, is collateralized by consumer loan receivables of customers of the furniture and electronics retailer. These loans have an aggregate fair value of $76,156 and $167,568 or 50.2% and 31.5% of the loan portfolio as of September 30, 2024 and December 31, 2023, respectively, and are concentrated in the retail industry. The fair value of these loans at September 30, 2024 has been impacted by a deterioration in Conn’s operating results in the second quarter of 2024, which culminated in the Conn's Chapter 11 bankruptcy filing on July 23, 2024 as more fully discussed in Note 2(h) below. On December 17, 2024, the Company entered into an agreement with the first-lien holder banks of the Conn’s loan receivable to assign the first-lien loan receivable to the Company for consideration of $27,738. The Company collected the $27,738 and interest earned on the first-lien loan receivable of $238 for the period from December 17, 2024 through January 24, 2025 when the first-lien loan receivable was paid in full. The Company also has a loan receivable with a principal amount of $224,968 and $200,506 as of September 30, 2024 and December 31, 2023, respectively. The increase in the loan receivable principal amount at September 30, 2024 in the amount of $24,462 includes interest in-kind interest that was capitalized to the loan receivable balance annually on the loan's anniversary date. The loan receivable is secured by a first priority security interest in Freedom equity interests owned by Brian Kahn as more fully described in Note 2(h) below. The fair value of the loan receivable and collateral from the security interest in Freedom at September 30, 2024 is impacted by the Freedom VCM filing of voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024. The fair value of the loan receivable was $2,250 and $200,506 or 1.5% and 37.7% of the total loan portfolio as of September 30, 2024 and December 31, 2023, respectively. As a result of the bankruptcy filing on November 3, 2024, the loan receivable at September 30, 2024 is on non-accrual and there is no accrued interest receivable on the loan receivable at September 30, 2024. Interest receivable on the loan in the amount of $8,889 as of December 31, 2023 is included in prepaid expenses and other assets in the condensed consolidated balance sheets. The fair value of the underlying collateral for this loan is primarily comprised of other securities which amounted to $2,250 at September 30, 2024 and has decreased to a fair value of $2,154 at February 7, 2025. At September 30, 2024, the maximum amount of loss that the Company is exposed to loss from loans receivable concentration is an amount equivalent to the fair value of these loans which totaled $78,406. The Company is also exposed to a concentration of risk related to Freedom VCM which totaled $9,310 as of September 30, 2024 from the Freedom VCM Receivables, Inc. loan receivable and additional exposure from the loan receivable with a fair value of $2,250 as described above where the primary security includes other public equity securities owned by Brian Kahn. (e) Advertising Expenses The Company expenses advertising costs, which consist primarily of costs for printed materials, as incurred. Advertising costs totaled $1,477 and $5,911 during the three months ended September 30, 2024 and 2023, respectively, and $6,155 and $16,462 during the nine months ended September 30, 2024 and 2023. Advertising expense was included as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. (f) Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. (g) Restricted Cash As of September 30, 2024 and December 31, 2023, restricted cash included $1,366 and $1,875, respectively, primarily consisting of cash collateral for leases. Cash, cash equivalents and restricted cash consist of the following:
| September 30, 2024 |  | December 31, 2023
Cash and cash equivalents | $ | 159,247 |  |  | $ | 222,690 |
Restricted cash | 1,366 |  |  | 1,875 |
Total cash, cash equivalents and restricted cash | $ | 160,613 |  |  | $ | 224,565 |
(h) Loans Receivable Under Accounting Standards Codification (“ASC”) 825 - Financial Instruments, the Company elected the fair value option for all outstanding loans receivable. Management evaluates the performance of the loan portfolio on a fair value basis. Under the fair value option, loans receivables are measured at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in the condensed consolidated statements of operations. Loans receivable, at fair value totaled $151,704 and $532,419 as of September 30, 2024 and December 31, 2023, respectively. The loans have various maturities through August 2033. As of September 30, 2024 and December 31, 2023, the historical cost of loans receivable accounted for under the fair value option was $442,880 and $555,882, respectively, which included principal balances of $446,089 and $563,637 respectively, and unamortized costs, origination fees, premiums and discounts, totaling $3,210 and $7,755, respectively. The principal balance of loans receivable exceeded the fair value of loans by $291,176 and $23,463 as of September 30, 2024 and December 31, 2023, respectively. At the time of origination, the Company's loans are collateralized by the assets of borrowers and other pledged collateral and may have guarantees to provide for protection of the payments due on loans receivable. During the three months ended September 30, 2024 and 2023, the Company recorded net unrealized losses of $73,360 and $859, respectively, and net unrealized losses of $267,713 and net unrealized gains of $51,807 during the nine months ended September 30, 2024 and 2023, respectively, on loans receivable, at fair value, which is included in fair value adjustments on loans on the condensed consolidated statements of operations. Loans receivable, at fair value on non-accrual and 90 days or greater past due was $67,274 and $41,236 as of September 30, 2024 and December 31, 2023, respectively, which represented approximately 44.3% and 7.7% of total loans receivable, at fair value as of September 30, 2024 and December 31, 2023, respectively. The principal balance of loans receivable on non-accrual and 90 days or greater past due was $322,792 and $43,326 as of September 30, 2024 and December 31, 2023. Interest income for loans on non-accrual and/or 90 days or greater past due is recognized separately from changes in fair value adjustments on loans on the condensed consolidated statements of operations. The amount of gains or (losses) included in earnings attributable to changes in instrument – specific credit risk was $(71,746) and $(759) during the three months ended September 30, 2024 and 2023, respectively, and $(259,163) and $45,350 during the nine months ended September 30, 2024 and 2023, respectively. The gains or losses attributable to changes in instrument – specific risk was determined by management based on an estimate of the fair value change during the period specific to each loan receivable. The Company may periodically provide limited guarantees to third parties for loans that are made to investment banking and lending clients. As of September 30, 2024, the Company has outstanding limited guarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc. (“B&W”) as further described in Note 17(b). In accordance with the credit loss standard, the Company evaluates the need to record an allowance for credit losses for these loan guarantees since they have off-balance sheet credit exposures. As of September 30, 2024, the Company has not recorded any provision for credit losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure. Interest income on loans receivable is recognized based on the stated interest rate of the loan on the unpaid principal balance plus the amortization of any costs, origination fees, premiums and discounts and is included in interest income - loans on the condensed consolidated statements of operations. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related loans. Unearned income, discounts and premiums are amortized to interest income using a level yield methodology. On August 21, 2023, one of the Company’s subsidiaries and Vintage Capital Management, LLC (“VCM”), an affiliate of Brian Kahn, amended and restated a promissory note (the “Amended and Restated Note”), pursuant to which VCM owes the Company's subsidiary the aggregate principal amount of $200,506 and bears interest at the rate of 12% per annum payable-in-kind with a maturity date of December 31, 2027. The Amended and Restated Note requires repayments prior to the maturity date from certain proceeds received by VCM, Mr. Kahn or his affiliates from, among other proceeds, distributions or dividends paid by Freedom VCM in amount equal to the greater of (i) 80% of the net after-tax proceeds, and (ii) 50% of gross proceeds. The obligations under the Amended and Restated Note are primarily secured by a first priority perfected security interest in Freedom VCM equity interests owned by Mr. Kahn, the CEO and a board member of Freedom VCM as of December 31, 2023, and his spouse with a value (based on the transaction price in the FRG take-private transaction) of $227,296 as of August 21, 2023. On January 22, 2024, Mr. Kahn resigned as CEO and a member of the board of directors of Freedom VCM. The fair value of the Freedom VCM equity interest owned by Mr. Kahn and his spouse was zero and $232,065 as of September 30, 2024 and December 31, 2023, respectively. Amounts owing under the Amended and Restated Note may be repaid at any time without penalty. On a quarterly basis, the Company will continue to obtain third party appraisals to evaluate the value of the collateral of the loan since the repayment of the loan and accrued interest will be paid primarily from the cash distributions from Freedom VCM or foreclosure on the underlying collateral. In light of Mr. Kahn’s alleged involvement with the alleged misconduct concerning Prophecy Asset Management LP, the Company can provide no assurances that it will not be subject to claims asserting an interest in the Freedom VCM equity interests owned by Mr. Kahn, including those that collateralize the Amended and Restated Note. If a claim were successful, it would diminish the value of the collateral which could impact the carrying value of the loan. If such claims are made, however, the Company believes it has valid defenses from any such claim and any such claim would be without merit. Other factors leading to continued deterioration in the collateral, including in the performance of Freedom VCM or delays in the execution of its strategies, including the possible disposition of additional businesses and further de-leveraging of its balance sheet, for the loan receivable may further impact the ultimate collection of principal and interest. To the extent the loan balance and accrued interest exceed the underlying collateral value of the loan, as was the case as of September 30, 2024, the fair value of the loan has been and will be impacted and has resulted and will result in an unrealized loss being recorded in the condensed consolidated statements of operations. Subsequent to September 30, 2024, Freedom VCM filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024 which impacts the collateral for this loan receivable. The fair value adjustment on the VCM loan receivable was $(54,333) and $(222,718) for the three and nine months ended September 30, 2024. The fair value of the underlying collateral for this loan decreased to a fair value of $2,154 at February 7, 2025. The $2,154 is comprised of other public securities. As of September 30, 2024, loans receivable had an aggregate remaining contractual principal balance of $446,089, an aggregate fair value of $151,704, and the contractual principal balance exceeded the fair value by $294,385. As of December 31, 2023, loans receivable had an aggregate remaining contractual principal balance of $563,637, an aggregate fair value of $532,419, and the contractual principal balance exceeded the fair value by $31,218. The Company’s has a loan receivable with a principal amount of $93,000 outstanding from Conn’s and two loans with a fair value of $12,451 outstanding which are discussed below, (the Badcock Receivables I and Freedom VCM Receivables loans receivable, each as defined below), which are serviced by Conn’s. Accrued interest on the $93,000 Conn’s loan receivable was current as of June 30, 2024. As a result of Conn's voluntary petition filing on July 23, 2024 for relief (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) this loan receivable with a fair value of $63,705 at September 30, 2024 is included in loans receivable on non-accrual as discussed above. Future collection of the $93,000 Conn’s loan receivable is expected to be paid from the sale of assets and servicing of a pool consumer receivables that serve as collateral for the loan where we have a second lien on these assets. These proceeds which are expected to be collected over the next year has been impacted by Conn’s voluntary petition filing on July 23, 2024 for relief (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The commencement of the Chapter 11 Cases constitutes an event of default that accelerates the repayment obligations under the $93,000 loan receivable to Conn’s. Any efforts to enforce repayment obligations under the Conn’s $93,000 loan receivable are automatically stayed as a result of the Chapter 11 Cases and the Company’s rights of enforcement in respect of this loan are subject to the applicable provisions of the Bankruptcy Code. The fair value adjustment on the Conn's loan receivable was $(18,600) and $(27,084) for the three and nine months ended September 30, 2024. On December 17, 2024, the Company entered into an agreement with the first-lien holder banks of the Conn’s loan receivable to assign the first-lien loan receivable to the Company for consideration of $27,738. The Company collected the principal of $27,738 and interest on the first-lien loan receivable of $238 for the period from December 17, 2024 through January 24, 2025 when the first-lien loan receivable was paid in full. The Company has continued to receive payments for the other two loans with a fair value of $12,451 at September 30, 2024 and has received payments of $7,717 subsequent to September 30, 2024 and through February 5, 2025 on the Badcock Receivables I and Freedom VCM Receivable loans receivable. Badcock Loan Receivable On December 20, 2021, the Company entered into a Master Receivables Purchase Agreement (“Badcock Receivables I”) with W.S. Badcock Corporation, a Florida corporation (“WSBC”), which at the time was an indirect wholly owned subsidiary of Franchise Group, Inc., a Delaware corporation (“FRG”), which became a subsidiary of Freedom VCM as a result of the transaction on August 21, 2023. The Company paid $400,000 in cash to WSBC for the purchase of certain consumer credit receivables which are small consumer loans issued by WSBC to consumers for the purchase of merchandise sold at WSBC's stores. On September 23, 2022, the Company's then majority-owned subsidiary, B Riley Receivables II, LLC (“BRRII”), a Delaware limited liability company, entered into a Master Receivables Purchase Agreement (“Badcock Receivables II”) with WSBC. This purchase of $168,363 consumer credit receivables of WSBC was partially financed by a $148,200 term loan discussed in Note 11. During the three months ended March 31, 2023, BRRII entered into Amendment No. 2 and No. 3 to Badcock Receivables II with WSBC for a total of $145,278 in additional consumer credit receivables. The accounting for these transactions resulted in the Company recording a loan receivable from WSBC with the recognition of interest income at an imputed rate based on the cash flows expected to be received from the collection of the consumer receivables that serve as collateral for the loan. The collateral for these loans receivables are the individual consumer credit receivables that were originally issued to WSBC consumers for merchandise sold in WSBC stores and the total amount of collections on these loan receivables is dependent upon their credit performance. These loan receivables are measured at fair value. On August 21, 2023, all of the equity interests of BRRII were sold to Freedom VCM Receivables, Inc. (“Freedom VCM Receivables”), a subsidiary of Freedom VCM, which resulted in a loss of $78. In connection with the sale, Freedom VCM Receivables assumed the obligations with respect to the Pathlight Credit Agreement as more fully discussed in Note 11 and Freedom VCM Receivables entered into the Freedom Receivables Note (as defined below) in the amount of $58,872, with a stated interest rate of 19.74% and a maturity date of August 21, 2033 with payments of principal and interest on the note limited solely to the performance of certain consumer receivables held by BRRII. This loan receivable is measured at fair value. In connection with these loans, the Company entered into a Servicing Agreement with WSBC pursuant to which WSBC provides to the Company certain customary servicing and account management services in respect of the receivables purchased by the Company under the Receivables Purchase Agreement. In addition, subject to certain terms and conditions, FRG has agreed to guarantee the performance by WSBC of its obligations under the Master Receivables Purchase Agreements and the Servicing Agreement. As of September 30, 2024 and December 31, 2023, the Badcock Receivables I loan receivable in the Company's condensed consolidated balance sheets included loans measured at fair value in the amount of $3,141 and $20,624, respectively. As of September 30, 2024 and December 31, 2023, the Freedom Receivables Note was included in the Company's condensed consolidated balance sheets in loans receivable, at fair value in the amount of $9,310 and $42,183, respectively. Nogin Loan and Loan Commitment On November 16, 2023, the Company entered into a Chapter 11 Restructuring Support Agreement (as amended, the “RSA”) with Nogin Inc. and certain of its subsidiaries (collectively, “Nogin”), and certain holders of Nogin’s convertible notes (the “Consenting Noteholders”). Pursuant to the RSA, the Company funded $17,530 of debtor-in-possession (“DIP”) financing as of December 31, 2023. The Company funded an additional $15,470 during the three months ended March 31, 2024, which increased the DIP financing to $33,000 at March 31, 2024. This loan receivable had a fair value of $17,980 as of December 31, 2023. An additional $3,000 of DIP financing was funded in the second quarter of 2024, for total DIP financing (inclusive of $1,700 in fees payable in kind) of $37,700, which was extinguished upon the Company's acquisition of Nogin on May 3, 2024. On May 3, 2024, the Company funded an additional $18,670 in cash to complete the acquisition of Nogin of which $15,500 was a payment to the Consenting Noteholders. See Note 3 for more details on the Nogin acquisition. (i) Securities and Other Investments Owned and Securities Sold Not Yet Purchased Securities owned consist of equity securities including, common and preferred stocks, warrants, and options; corporate bonds; other fixed income securities including, government and agency bonds; loans receivable valued at fair value; and investments in partnerships. Securities sold, but not yet purchased represent obligations of the Company to deliver the specified security at the contracted price and thereby create a liability to purchase the security in the market at prevailing prices. Changes in the value of these securities are reflected currently in the results of operations. As of September 30, 2024 and December 31, 2023, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities:
| September 30, 2024 |  | December 31, 2023
Securities and other investments owned: |  |  |
Equity securities | $ | 289,279 |  |  | $ | 711,577 |
Corporate bonds | 31,496 |  |  | 59,287 |
Other fixed income securities | 4,757 |  |  | 2,989 |
Partnership interests and other | 16,238 |  |  | 35,196 |
| $ | 341,770 |  |  | $ | 809,049 |
Securities sold not yet purchased: |  |  |
Equity securities | $ | 634 |  |  | $ | 1,037 |
Corporate bonds | 509 |  |  | 5,971 |
Other fixed income securities | 1,307 |  |  | 1,593 |
| $ | 2,450 |  |  | $ | 8,601 |
The Company owns certain equity securities that are accounted for under the fair value option where the Company would otherwise use the equity method of accounting. Investments become subject to the equity method of accounting when the Company possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when the Company possesses more than 20% of the voting interests of the investee. However, the Company may have the ability to exercise significant influence over the investee when the Company owns less than 20% of the voting interests of the investee depending on the facts and circumstances that demonstrate that the ability to exercise influence is present, such as when the Company has representation on the board of directors of such investee. In accordance with ASC - 321 Equity Securities unrealized gains (losses) on equity securities held at September 30, 2024, includes unrealized gains (losses) of $(25,748) and $(72,583) for the three months ended September 30, 2024 and 2023, respectively, and $(217,370) and $(77,710) for the nine months ended September 30, 2024 and 2023, respectively, reported in other income (loss) - realized and unrealized gains (losses) on investments in the condensed consolidated statement of operations. Freedom VCM Holdings, LLC Equity Interest and Take-Private Transaction On August 21, 2023, the Company acquired an equity interest in Freedom VCM for $216,500 in cash in connection with the closing of the acquisition of FRG, by a buyer group that included members of senior management of FRG, led by Mr. Kahn, FRG’s then Chief Executive Officer (the “FRG take-private transaction”). In connection with the closing of the FRG take-private transaction, the Company terminated an investment advisory agreement (the “Advisory Agreement”) with Mr. Kahn. Pursuant to the Advisory Agreement, Mr. Kahn, as financial advisor, had the sole power to vote or dispose of $64,644 of shares of FRG common stock (based on the value of FRG shares in the FRG take-private transaction as of the closing date of such transaction) held of record by B. Riley Securities, Inc. (“BRS”). Upon the termination of the Advisory Agreement, (i) Mr. Kahn’s right to vote or dispose of such FRG shares terminated, (ii) such FRG shares owned by BRS were rolled over into additional equity interests in Freedom VCM in connection with the FRG take-private transaction, and (iii) Mr. Kahn owed a total of $20,911 to the Company under the Advisory Agreement which amount was added to, and included in, the Amended and Restated Note. Following these transactions, the Company owns an equity interest of $281,144 (based on the transaction price in the FRG take-private transaction) or 31% of the outstanding equity interests in Freedom VCM. Also in connection with the FRG take-private transaction, on August 21, 2023 all of the equity interests of BRRII, a majority-owned subsidiary of the Company, were sold to a Freedom VCM affiliate, which resulted in a loss of $78. In connection with the sale, the Freedom VCM affiliate assumed the obligations with respect to the Pathlight Credit Agreement, as further discussed in Note 11, and the Company entered into a non-recourse promissory note with another Freedom VCM affiliate in the amount of $58,872, with a stated interest rate of 19.74% and a maturity date of August 21, 2033 (the “Freedom Receivables Note”) with payments of principal and interest on the note limited solely to performance of certain receivables held by BRRII. On December 18, 2023, a wholly owned subsidiary of Freedom VCM entered into a transaction that resulted in the sale of all of the operations of WS Badcock to Conn’s in exchange for the issuance by Conn’s of 1,000,000 shares of Conn’s preferred stock (the “Preferred Shares”). The Preferred Shares issued by Conn’s to Freedom VCM, subject to the terms set forth in the Certificate of Designation, are nonvoting and are convertible into an aggregate of approximately 24,540,295 shares of non-voting common stock of Conn’s, which represented 49.99% of the issued and outstanding shares of common stock of Conn’s which resulted in consideration received by Freedom VCM of approximately $69,900. As a result of the convertible preferred stock having a conversion feature into 49.99% of the common stock of Conn’s, Freedom VCM is considered to have significant influence over Conn’s in accordance with ASC 323 – Investments – Equity Method and Joint Ventures. On July 23, 2024, Conn’s filed a Chapter 11 Case under the Bankruptcy Code in the Bankruptcy Court as more fully discussed in Note 2(h). The original $69,900 of consideration that Freedom VCM received from the sale of WS Badcock to Conn's that is still held by Freedom VCM at September 30, 2024 is impaired and there is expected to be no recovery of any value by Freedom VCM as a result of Conn’s bankruptcy filing. Subsequent to September 30, 2024, Freedom VCM filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024 which reduced the fair value of this equity investment by $(63,674) to zero. The Company has elected to account for this 31% equity investment under the fair value option. The following tables contain summarized financial information with respect to Freedom VCM, included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of June 30, 2024 and September 30, 2023 correspond to amounts as of September 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and nine months ended June 30, 2024 correspond to amounts during the three and nine months ended September 30, 2024 and 2023, respectively of the Company), which is the period in which the most recent financial information is available:
| June 30, 2024 |  | December 31, 2023 |  |
Current assets | $ | 877,471 |  |  | $ | 961,787 |  |  |
Noncurrent assets | $ | 2,936,951 |  |  | $ | 3,131,506 |  |  |
Current liabilities | $ | 571,661 |  |  | $ | 720,510 |  |  |
Noncurrent liabilities | $ | 2,641,119 |  |  | $ | 2,640,805 |  |  |
Equity attributable to investee | $ | 601,642 |  |  | $ | 731,978 |  |  |
| For the three months ended June 30, |  | For the nine months ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenues | $ | 767,404 |  |  | $ | 1,038,686 |  |  | $ | 2,383,350 |  |  | $ | 3,259,396 |
Cost of revenues | $ | 491,702 |  |  | $ | 632,623 |  |  | $ | 1,503,104 |  |  | $ | 1,288,751 |
Loss from continuing operations | $ | — |  |  | $ | — |  |  | $ | (1,175) |  |  | $ | — |
Net loss attributable to investees | $ | (111,881) |  |  | $ | (50,796) |  |  | $ | (300,720) |  |  | $ | (159,824) |
As of September 30, 2024 and December 31, 2023, the fair value of the investment in Freedom VCM totaled zero and $287,043, respectively, and is included in securities and other investments owned, at fair value in the condensed consolidated balance sheets. The change in fair value recorded in the income statement was an unrealized loss of $63,674 and $287,043 for the three and nine months ended September 30, 2024, respectively. Babcock and Wilcox Enterprises, Inc, Equity Investment The Company owns a 30% voting interest in B&W whereby the Company has elected to account for this investment under the fair value option. The following tables contain summarized financial information with respect to B&W included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of June 30, 2024 and September 30, 2023 correspond to amounts as of September 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and nine months ended June 30, 2024 and 2023 correspond to amounts during the three and nine months ended September 30, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:
| June 30, 2024 |  | December 31, 2023
Current assets | $ | 574,562 |  |  | $ | 497,593 |
Noncurrent assets | $ | 274,560 |  |  | $ | 278,105 |
Current liabilities | $ | 333,890 |  |  | $ | 350,197 |
Noncurrent liabilities | $ | 713,576 |  |  | $ | 625,851 |
Equity attributable to investee | $ | (198,929) |  |  | $ | (200,961) |
Noncontrolling interest | $ | 585 |  |  | $ | 611 |
| For the three months ended June 30, |  | For the nine months ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenues | $ | 233,642 |  |  | $ | 291,515 |  |  | $ | 668,365 |  |  | $ | 769,197 |
Cost of revenues | $ | 179,152 |  |  | $ | 228,352 |  |  | $ | 509,779 |  |  | $ | 600,441 |
Income (loss) from continuing operations | $ | 25,222 |  |  | $ | 594 |  |  | $ | (44,843) |  |  | $ | (14,381) |
Net income (loss) | $ | 25,364 |  |  | $ | (5,012) |  |  | $ | (54,151) |  |  | $ | (11,827) |
Net income (loss) attributable to investees | $ | 25,315 |  |  | $ | (5,088) |  |  | $ | (57,972) |  |  | $ | (15,563) |
As of September 30, 2024 and December 31, 2023, the fair value of the investment in B&W totaled $55,991 and $40,072, respectively, and is included in securities and other investments owned, at fair value in the condensed consolidated balance sheets. Other Public Company Equity Investments As of September 30, 2024, the Company had a voting interest of 7% in Synchronoss Technologies, Inc. The Company has significant influence due to the equity ownership interest and board representation for this company. The Company has elected to account for this equity investment under the fair value option. The following tables contain summarized financial information with respect to Synchronoss Technologies, Inc., included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of June 30, 2024 and September 30, 2023 correspond to amounts as of September 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and nine months ended June 30, 2024 and 2023 correspond to amounts during the three and nine months ended September 30, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:
| Synchronoss Technologies, Inc.
| June 30, 2024 |  | December 31, 2023
Current assets | $ | 75,520 |  |  | $ | 82,002 |
Noncurrent assets | $ | 220,152 |  |  | $ | 228,335 |
Current liabilities | $ | 42,401 |  |  | $ | 47,697 |
Noncurrent liabilities | $ | 210,152 |  |  | $ | 164,706 |
Equity attributable to investee | $ | 43,119 |  |  | $ | 97,934 |
| Synchronoss Technologies, Inc.
| For the three months ended June 30, |  | For the nine months ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenues | $ | 43,458 |  |  | $ | 41,019 |  |  | $ | 127,825 |  |  | $ | 124,256 |
Cost of revenues | $ | 10,401 |  |  | $ | 11,488 |  |  | $ | 30,916 |  |  | $ | 34,447 |
Net income (loss) attributable to investees | $ | 78 |  |  | $ | (10,979) |  |  | $ | (32,582) |  |  | $ | (40,297) |
As of September 30, 2024 and December 31, 2023, the fair value of the equity investment in Synchronoss Technologies, Inc. was $11,212 and $8,780, respectively. These amounts are included in securities and other investments owned in the condensed consolidated balance sheets. Other Equity Investments As of September 30, 2024, the Company had other equity investments where the Company is considered to have the ability to exercise influence since the Company has representation on the board of directors or the Company is presumed to have the ability to exercise significant influence since the investment is more than minor and the limited liability company is required to maintain specific ownership accounts for each member. The Company has elected to account for these equity investments under the fair value option. These equity investments are comprised of equity investments in five private companies at September 30, 2024 and six private companies at December 31, 2023. The following table contains summarized financial information for these companies, included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of June 30, 2024 and September 30, 2023 correspond to amounts as of September 30, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three and nine months ended June 30, 2024 and 2023 correspond to amounts during the three and nine months ended September 30, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:
| June 30, 2024 |  | December 31, 2023
Current assets | $ | 239,004 |  |  | $ | 279,810 |
Noncurrent assets | $ | 563,871 |  |  | $ | 622,632 |
Current liabilities | $ | 222,125 |  |  | $ | 185,925 |
Noncurrent liabilities | $ | 146,226 |  |  | $ | 236,829 |
Preferred stock | $ | — |  |  | $ | 4,500 |
Equity attributable to investee | $ | 434,524 |  |  | $ | 475,188 |
| For the three months ended June 30, |  | For the nine months ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Revenues | $ | 111,909 |  |  | $ | 36,107 |  |  | $ | 372,418 |  |  | $ | 111,542 |
Cost of revenues | $ | 76,286 |  |  | $ | 20,492 |  |  | $ | 279,426 |  |  | $ | 73,244 |
Net income (loss) attributable to investees | $ | (4,273) |  |  | $ | 6,586 |  |  | $ | (14,229) |  |  | $ | 3,701 |
As of September 30, 2024 and December 31, 2023, the fair value of these five investments totaled $50,595 and six investments totaled $87,713, respectively, and is included in securities and other investments owned, at fair value in the condensed consolidated balance sheets. (j) Fair Value Measurements The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) for identical instruments that are highly liquid, observable, and actively traded in over-the-counter markets. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable and can be corroborated by market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company’s securities and other investments owned and securities sold and not yet purchased are comprised of common and preferred stocks and warrants, corporate bonds, and investments in partnerships. Investments in common stocks that are based on quoted prices in active markets are included in Level 1 of the fair value hierarchy. The Company also holds loans receivable valued at fair value, nonpublic common and preferred stocks and warrants for which there is little or no public market and fair value is determined by management on a consistent basis. For investments where little or no public market exists, management’s determination of fair value is based on the best available information which may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent sales prices of the issuer’s securities and liquidity risks. These investments are included in Level 3 of the fair value hierarchy. Investments in partnership interests include investments in private equity partnerships that primarily invest in equity securities, bonds, and direct lending funds. The Company also invests in priority investment funds and the underlying securities held by these funds are primarily corporate and asset-backed fixed income securities and restrictions exist on the redemption of amounts invested by the Company. The Company’s partnership and investment fund interests are valued based on the Company’s proportionate share of the net assets of the partnerships and funds; the value for these investments is derived from the most recent statements received from the general partner or fund administrator. These partnership and investment fund interests are valued at net asset value (“NAV”) and are excluded from the fair value hierarchy in the table below in accordance with ASC 820 - Fair Value Measurements. As of September 30, 2024 and December 31, 2023, partnership and investment fund interests valued at NAV of $16,238 and $35,196, respectively, are included in securities and other investments owned in the accompanying condensed consolidated balance sheets. Securities and other investments owned also include investments in nonpublic entities that do not have a readily determinable fair value and do not report NAV per share. These investments are accounted for using a measurement alternative under which they are measured at cost and adjusted for observable price changes and impairments. Observable price changes result from, among other things, equity transactions for the same issuer executed during the reporting period, including subsequent equity offerings or other reported equity transactions related to the same issuer. For these transactions to be considered observable price changes of the same issuer, we evaluate whether these transactions have similar rights and obligations, including voting rights, distribution preferences, conversion rights, and other factors, to the investments we hold. The following table presents, as of September 30, 2024 and December 31, 2023, the carrying value of equity securities measured under the measurement alternative investments and the related adjustments recorded during the periods presented for those securities with observable price changes:
| September 30, 2024 |  | December 31, 2023
Securities and other investments owned, carrying value | $ | 65,735 |  |  | $ | 64,455 |
Upward carrying value changes | 1,289 |  |  | 100 |
Downward carrying value changes/impairment | (2) |  |  | (21,395) |
The Company measures certain assets at fair value on a nonrecurring basis. These assets include equity method investments when they are deemed to be other-than-temporarily impaired, investments adjusted to their fair value by applying the measurement alternative, assets acquired and liabilities assumed in an acquisition or in a nonmonetary exchange, and property, plant and equipment and intangible assets that are written down to fair value when they are held for sale or determined to be impaired. The Company did not have any material assets or liabilities that were measured at fair value on a nonrecurring basis in periods subsequent to initial recognition as of September 30, 2024 and December 31, 2023. The following tables present information on the financial assets and liabilities measured and recorded at fair value on a recurring basis as of September 30, 2024 and December 31, 2023.
| Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2024 Using
| Fair value as of September 30, 2024 |  | Quoted prices in active markets for identical assets (Level 1) |  | Other observable inputs (Level 2) |  | Significant unobservable inputs (Level 3)
Assets: |  |  |  |  |  |  |
Securities and other investments owned: |  |  |  |  |  |  |
Equity securities | $ | 223,543 |  |  | $ | 161,595 |  |  | $ | — |  |  | $ | 61,948 |
Corporate bonds | 31,496 |  |  | 27,410 |  |  | 4,086 |  |  | — |
Other fixed income securities | 4,757 |  |  | — |  |  | 4,757 |  |  | — |
Total securities and other investments owned | 259,796 |  |  | 189,005 |  |  | 8,843 |  |  | 61,948 |
Loans receivable, at fair value | 151,704 |  |  | — |  |  | — |  |  | 151,704 |
Total assets measured at fair value | $ | 411,500 |  |  | $ | 189,005 |  |  | $ | 8,843 |  |  | $ | 213,652 |
Liabilities: |  |  |  |  |  |  |
Securities sold not yet purchased: |  |  |  |  |  |  |
Equity securities | $ | 634 |  |  | $ | 634 |  |  | $ | — |  |  | $ | — |
Corporate bonds | 509 |  |  | — |  |  | 509 |  |  | — |
Other fixed income securities | 1,307 |  |  | — |  |  | 1,307 |  |  | — |
Total securities sold not yet purchased | 2,450 |  |  | 634 |  |  | 1,816 |  |  | — |
Contingent consideration | 23,702 |  |  | — |  |  | — |  |  | 23,702 |
Total liabilities measured at fair value | $ | 26,152 |  |  | $ | 634 |  |  | $ | 1,816 |  |  | $ | 23,702 |
| Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2023 Using
| Fair value at December 31, 2023 |  | Quoted prices in active markets for identical assets (Level 1) |  | Other observable inputs (Level 2) |  | Significant unobservable inputs (Level 3)
Assets: |  |  |  |  |  |  |
Securities and other investments owned: |  |  |  |  |  |  |
Equity securities | $ | 647,122 |  |  | $ | 194,541 |  |  | $ | — |  |  | $ | 452,581 |
Corporate bonds | 59,287 |  |  | 56,045 |  |  | 3,242 |  |  | — |
Other fixed income securities | 2,989 |  |  | — |  |  | 2,989 |  |  | — |
Total securities and other investments owned | 709,398 |  |  | 250,586 |  |  | 6,231 |  |  | 452,581 |
Loans receivable, at fair value | 532,419 |  |  | — |  |  | — |  |  | 532,419 |
Total assets measured at fair value | $ | 1,241,817 |  |  | $ | 250,586 |  |  | $ | 6,231 |  |  | $ | 985,000 |
Liabilities: |  |  |  |  |  |  |
Securities sold not yet purchased: |  |  |  |  |  |  |
Equity securities | $ | 1,037 |  |  | $ | 1,037 |  |  | $ | — |  |  | $ | — |
Corporate bonds | 5,971 |  |  | — |  |  | 5,971 |  |  | — |
Other fixed income securities | 1,593 |  |  | — |  |  | 1,593 |  |  | — |
Total securities sold not yet purchased | 8,601 |  |  | 1,037 |  |  | 7,564 |  |  | — |
Contingent consideration | 27,985 |  |  | — |  |  | — |  |  | 27,985 |
Total liabilities measured at fair value | $ | 36,586 |  |  | $ | 1,037 |  |  | $ | 7,564 |  |  | $ | 27,985 |
As of September 30, 2024 and December 31, 2023, financial assets measured and reported at fair value on a recurring basis and classified within Level 3 were $213,652 and $985,000, respectively, or 9.9% and 16.2%, respectively, of the Company’s total assets. In determining the fair value for these Level 3 financial assets, the Company analyzes various financial, performance and market factors to estimate the value, including where applicable, over-the-counter market trading activity. The following table summarizes the significant unobservable inputs in the fair value measurement of Level 3 financial assets and liabilities by category of investment and valuation technique as of September 30, 2024 and December 31, 2023:
| Fair value at September 30, 2024 |  | Valuation Technique |  | Unobservable Input |  | Range |  | Weighted Average(1)
Assets: |  |  |  |  |  |  |  |  |
Equity securities | $ | 54,135 |  |  | Market approach |  | Multiple of EBITDA |  | 2.5x - 7.0x |  | 4.3x
|  |  |  |  | Multiple of Sales |  | 0.6x - 3.0x |  | 2.4x
|  |  |  |  | Market price of related security |  | $0.01 - $11.42 |  | $11.13
| 7,813 |  |  | Option pricing model |  | Annualized volatility |  | 47.0% - 170.0% |  | 76.0%
Loans receivable at fair value | 142,239 |  |  | Discounted cash flow |  | Market interest rate |  | 13.6% - 74.7% |  | 24.0%
| 9,465 |  |  | Market approach |  | Market price of related security |  | $14.89-$15.98 |  | $15.68
|  |  |  |  | Multiple of Sales |  | 3.5x |  | 3.5x
Total level 3 assets measured at fair value | $ | 213,652 |  |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |
Contingent consideration | $ | 23,702 |  |  | Discounted cash flow |  | Asset volatility |  | 69.0% |  | 69.0%
|  |  |  |  | Market interest rate |  | 8.5% |  | 8.5%
|  |  |  |  | Revenue volatility |  | 5.0% - 6.3% |  | 5.6%
Total level 3 liabilities measured at fair value | $ | 23,702 |  |  |  |  |  |  |  |  |
(1) - Unobservable inputs were weighted by the relative fair value of the financial instruments.
| Fair value at December 31, 2023 |  | Valuation Technique |  | Unobservable Input |  | Range |  | Weighted Average(1)
Assets: |  |  |  |  |  |  |  |  |
Equity securities | $ | 324,279 |  |  | Market approach |  | Multiple of EBITDA |  | 0.7x - 13.5x |  | 8.3x
|  |  |  |  | Multiple of Sales |  | 0.8x to 3.5x |  | 0.9x
|  |  |  |  | Market price of related security |  | $0.04 - $92.51 |  | $12.27
| 58,331 |  |  | Discounted cash flow |  | Market interest rate |  | 20.2% - 57.0% |  | 24.6%
| 69,971 |  |  | Option pricing model |  | Annualized volatility |  | 25.0% - 187.0% |  | 67.0%
Loans receivable at fair value | 512,522 |  |  | Discounted cash flow |  | Market interest rate |  | 10.0% - 41.6% |  | 17.1%
| 19,897 |  |  | Market approach |  | Market price of related security |  | $19.87 |  | $19.87
Total level 3 assets measured at fair value | $ | 985,000 |  |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |
Contingent consideration | $ | 27,985 |  |  | Discounted cash flow |  | EBITDA volatility |  | 70.0% |  | 70.0%
|  |  |  |  | Asset volatility |  | 69.0% |  | 69.0%
|  |  |  |  | Market interest rate |  | 8.5% |  | 8.5%
|  |  |  |  | Revenue volatility |  | 5.1% |  | 5.1%
Total level 3 liabilities measured at fair value | $ | 27,985 |  |  |  |  |  |  |  |  |
(1) - Unobservable inputs were weighted by the relative fair value of the financial instruments. The changes in Level 3 fair value hierarchy during the three months ended September 30, 2024 and 2023 were as follows:
| Level 3 Balance at Beginning of Period |  | Level 3 Changes During the Period |  | Level 3 Balance at End of Period |  | Change in unrealized gains (losses) (2)
| Fair Value Adjustments (1) |  | Relating to Undistributed Earnings |  | Purchases/ Originations |  | Sales |  | Settlements/ Repayments |  | Transfer in and/or out of Level 3 |  |
Three Months Ended September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities | $ | 114,982 |  |  | $ | (66,349) |  |  | $ | — |  |  | $ | 49 |  |  | $ | — |  |  | $ | 13,266 |  |  | $ | — |  |  | $ | 61,948 |  |  | $ | (66,346) |
Loans receivable at fair value | 229,199 |  |  | (71,477) |  |  | 874 |  |  | 27,727 |  |  | — |  |  | (34,619) |  |  | — |  |  | 151,704 |  |  | (71,478) |
Contingent consideration | 29,303 |  |  | 386 |  |  | — |  |  | — |  |  | — |  |  | (5,987) |  |  | — |  |  | 23,702 |  |  | — |
Three Months Ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities | $ | 170,503 |  |  | $ | (13,120) |  |  | $ | (47) |  |  | $ | 301,730 |  |  | $ | (467) |  |  | $ | — |  |  | $ | (535) |  |  | $ | 458,064 |  |  | $ | (13,109) |
Loans receivable at fair value | 683,827 |  |  | (859) |  |  | 2,873 |  |  | 34,337 |  |  | — |  |  | (171,036) |  |  | — |  |  | 549,142 |  |  | (1,646) |
Contingent consideration | 27,724 |  |  | 14 |  |  | — |  |  | 793 |  |  | — |  |  | (544) |  |  | — |  |  | 27,987 |  |  | — |
(1) - Fair value adjustments during the three months ended September 30, 2024 includes the following: $(66,349) of realized and unrealized gains (losses) on equity securities is comprised of $(15,127) of realized and unrealized gains (losses) included in trading (loss) income and $(51,222) of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $(71,477) of fair value adjustments on loans included in fair value adjustments on loans, and $386 related to contingent consideration included in selling, general and administrative expenses in the condensed consolidated statement of operations. Fair value adjustments during the three months ended September 30, 2023 includes the following: $(13,120) of realized and unrealized gains (losses) on equity securities is comprised of $(2,348) relating to equity securities included in trading (loss) income and $(10,772) of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $(859) of fair value adjustments on loans included in fair value adjustments on loans, and $14 related to contingent consideration included in selling, general and administrative expenses in the condensed consolidated statement of operations. (2) - For the three months ended September 30, 2024 and 2023, the change in unrealized gains (losses) is related to financial instruments held at the end of each respective reporting period. The changes in Level 3 fair value hierarchy during the nine months ended September 30, 2024 and 2023 were as follows:
| Level 3 Balance at Beginning of Year |  | Level 3 Changes During the Period |  |  |  | Level 3 Balance at End of Period |  | Change in unrealized gains (losses) (2)
| Fair Value Adjustments (1) |  | Relating to Undistributed Earnings |  | Purchases/ Originations |  | Sales |  | Settlements/ Repayments |  | Transfer in and/or out of Level 3 |  |
Nine Months Ended September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities | $ | 452,581 |  |  | $ | (325,310) |  |  | $ | 20 |  |  | $ | 665 |  |  | $ | (78,197) |  |  | $ | 13,266 |  |  | $ | (1,077) |  |  | $ | 61,948 |  |  | $ | (327,675) |
Loans receivable at fair value | 532,419 |  |  | (259,260) |  |  | 5,136 |  |  | 65,832 |  |  | (22,785) |  |  | (169,638) |  |  | — |  |  | 151,704 |  |  | (267,549) |
Contingent consideration | 27,985 |  |  | 2,057 |  |  | — |  |  | 1,055 |  |  | — |  |  | (7,395) |  |  | — |  |  | 23,702 |  |  | — |
Nine Months Ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity securities | $ | 153,972 |  |  | $ | 5,017 |  |  | $ | (35) |  |  | $ | 341,177 |  |  | $ | (34,509) |  |  | $ | — |  |  | $ | (7,558) |  |  | $ | 458,064 |  |  | $ | (13,749) |
Loans receivable at fair value | 701,652 |  |  | 51,624 |  |  | 1,824 |  |  | 389,883 |  |  | (7,500) |  |  | (588,091) |  |  | (250) |  |  | 549,142 |  |  | 24,030 |
Contingent consideration | 31,046 |  |  | (4,556) |  |  | — |  |  | 3,380 |  |  | — |  |  | (1,883) |  |  | — |  |  | 27,987 |  |  | — |
(1) - Fair value adjustments during the nine months ended September 30, 2024 includes the following: $(325,310) of realized and unrealized gains (losses) on equity securities is comprised of $(64,632) of realized and unrealized gains (losses) included in trading (loss) income and $(260,678) of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $(259,260) of fair value adjustments on loans included in fair value adjustments on loans, and $2,057 related to contingent consideration included in selling, general and administrative expenses in the condensed consolidated statement of operations. Fair value adjustments during the nine months ended September 30, 2023 includes the following: $5,017 of realized and unrealized gains (losses) on equity securities is comprised of $11,573 relating to equity securities included in trading (loss) income and $(6,556) of realized and unrealized gains (losses) included in other income (loss) - realized and unrealized gains (losses) on investments, $51,624 of fair value adjustments on loans included in fair value adjustments on loans, and $(4,556) related to contingent consideration included in selling, general and administrative expenses in the condensed consolidated statement of operations. (2) - For the nine months ended September 30, 2024 and 2023, the change in unrealized gains (losses) is related to financial instruments held at the end of each respective reporting period. The carrying amounts reported in the condensed consolidated financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and other liabilities approximate fair value based on the short-term maturity of these instruments. As of September 30, 2024 and December 31, 2023, the senior notes payable had a carrying amount of $1,529,560 and $1,668,021, respectively, and fair value of $727,965 and $1,127,503, respectively. The aggregate carrying amount of the Company's notes payable, revolving credit facility, and term loans of $534,246 and $688,343 as of September 30, 2024 and December 31, 2023, respectively, approximates fair value because the effective yield of such instrument is consistent with current market rates of interest for instruments of comparable credit risk. The investments in nonpublic entities that do not report NAV are measured at cost, adjusted for observable price changes and impairments, with changes recognized in realized and unrealized gains (losses) on investments on the condensed consolidated statements of operations. These investments are evaluated on a nonrecurring basis based on the observable price changes in orderly transactions for the identical or similar investment of the same issuer. Further adjustments are not made until another observable transaction occurs. Therefore, the determination of fair values of these investments in nonpublic entities that do not report NAV does not involve significant estimates and assumptions or subjective and complex judgments. Investments in nonpublic entities that do not report NAV are subject to a qualitative assessment for indicators of impairment. If indicators of impairment are present, the Company is required to estimate the investment’s fair value and immediately recognize an impairment charge in an amount equal to the investment’s carrying value in excess of its estimated fair value. The following table presents information on the assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of September 30, 2024 and December 31, 2023. These investments were measured due to an observable price change or impairment during the periods below.
| Fair Value Measurement Using
| Total |  | Quoted prices in active markets for identical assets (Level 1) |  | Other observable inputs (Level 2) |  | Significant unobservable inputs (Level 3)
As of September 30, 2024 |  |  |  |  |  |  |
Investments in nonpublic entities that do not report NAV | $ | 3,424 |  |  | $ | — |  |  | $ | 3,424 |  |  | $ | — |
As of December 31, 2023 |  |  |  |  |  |  |
Investments in nonpublic entities that do not report NAV | $ | 1,628 |  |  | $ | — |  |  | $ | 1,602 |  |  | $ | 26 |
(k) Foreign Currency Translation The Company transacts business in various foreign currencies. In countries where the functional currency of the underlying operations has been determined to be the local country’s currency, revenues and expenses of operations outside the United States are translated into United States dollars using average exchange rates while assets and liabilities of operations outside the United States are translated into United States dollars using period-end exchange rates. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. Transaction losses were $1,836 and gains were $322 during the three months ended September 30, 2024 and 2023, respectively, and gains were $231 and losses were $170 during the nine months ended September 30, 2024 and 2023, respectively. These amounts were included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. (l) Equity Method Investment As of September 30, 2024 and December 31, 2023, an equity investment that is accounted for under the equity method of accounting had a carrying value of $3,053 and $2,087, respectively, which is included in prepaid expenses and other assets in the accompanying condensed consolidated balance sheets. The Company’s share of earnings or losses from equity method investees included in income (loss) from equity investments was $6 and $(308) during the three months ended September 30, 2024 and 2023, respectively, and $12 and $(175) during the nine months ended September 30, 2024 and 2023, respectively, in the accompanying condensed consolidated statements of operations. bebe stores, inc. As of September 30, 2023, the Company owned a 47.5% ownership interest in bebe. This was accounted for under the equity method of accounting and the Company had no income from this equity investment during the three and nine months ended September 30, 2023. On October 6, 2023, the Company purchased an additional 3,700,000 shares of bebe for an aggregate purchase price of $18,500, resulting in an increase in the Company's ownership interest to 76.2%. The purchase of these additional shares resulted in the Company having a majority voting interest in bebe and the consolidation of bebe financial results for periods subsequent to October 6, 2023. (m) Supplemental Non-cash Disclosures During the nine months ended September 30, 2024, there was non-cash investing activity related to the receipt of a note receivable in the amount of $2,000 related to the sale of certain assets, $42,077 related to a loan receivable, at fair value that converted into equity securities, DIP loan conversion to purchase consideration equity for the purchase of Nogin in the amount of $37,700, and $11,453 related to a loan receivable, at fair value that converted into equity securities. During the nine months ended September 30, 2024, there was non-cash financing activity related to the Company's redemption of its 6.375% Senior Notes due 2025 in the aggregate principal amount of $1,130 in exchange for 36,903 shares of its common stock at fair value of $1,011 for a net gain on extinguishment of debt of $120. During the nine months ended September 30, 2023, non-cash activities related to the sale of BRRII and other businesses consisted of: (1) non-cash investing activity for a decrease in loans receivable of $124,397 and receipt of a loan receivable in the amount of $58,872, and (2) non-cash financing activity for a decrease in term loan in the amount of $65,790 and decrease in non-controlling interest related to the distribution of equity of subsidiary of $3,374. Other non-cash investing activities during the nine months ended September 30, 2023 included $24,780 of notes receivable that converted into equity securities;$23,668 of other receivables financed with a loan receivable; $1,190 of loans receivable, at fair value, that was included in consideration paid for the purchase of the Lingo noncontrolling interest; and $2,111 of common stock issued as part of the purchase price consideration for a business acquisition. During the nine months ended September 30, 2023, non-cash financing activities also included $7,000 in seller financing related to the purchase of the Lingo noncontrolling interest. (n) Variable Interest Entities The Company holds interests in various entities that meet the characteristics of a VIE but are not consolidated as the Company is not the primary beneficiary. Interests in these entities are generally in the form of equity interests, loans receivable, or fee arrangements. The Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion at each reporting date. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly by the Company or indirectly through related parties. The party with a controlling financial interest in a VIE is known as the primary beneficiary and consolidates the VIE. The Company determines whether it is the primary beneficiary of a VIE by performing an analysis that principally considers: (a) which variable interest holder has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; (b) which variable interest holder has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE; (c) the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders; (d) the terms between the VIE and its variable interest holders and other parties involved with the VIE; and (e) related-party relationships with other parties that may also have a variable interest in the VIE. On August 21, 2023, in connection with the FRG take-private transaction, one of the Company's subsidiaries (the “Lender”) and an affiliate of Mr. Kahn (the “Borrower”) entered into an amended and restated a promissory note as discussed further in Note 2(h) and 2(i) above. The Company was not involved in the design of the Borrower, has no equity financial interest, and has no rights to make decisions or participate in the management of the Borrower that significantly impact the economics of the Borrower. Since the Company does not have the power to direct the activities of the Borrower, the Company is not the primary beneficiary and therefore does not consolidate the Borrower. The promissory note is included in loans receivable, at fair value in the Company’s consolidated financial statements and is a variable interest in accordance with the accounting guidance. As of September 30, 2024 and December 31, 2023, the maximum amount of loss exposure to the VIE on a fair value basis was $2,250 and $209,395, respectively. The Company has entered into agreements to provide investment banking and advisory services to numerous investment funds (the “Funds”) that are considered variable interest entities under the accounting guidance. The Company earns fees from the Funds in the form of placement agent fees and carried interest. For placement agent fees, the Company receives a cash fee of generally 7% to 10% of the amount of raised capital for the Funds and the fee is recognized at the time the placement services occurred. The Company receives carried interest as a percentage allocation (8% to 15%) of the profits of the Funds as compensation for asset management services provided to the Funds and it is recognized under the ownership model of ASC 323 - Investments – Equity Method and Joint Ventures as an equity method investment with changes in allocation recorded currently in the results of operations. As the fee arrangements under such agreements are arm’s length and contain customary terms and conditions and represent compensation that is considered fair value for the services provided, the fee arrangements are not considered variable interests and accordingly, the Company does not consolidate such VIEs. Placement agent fees attributable to such arrangements were zero and $2,551 during the three months ended September 30, 2024 and 2023, respectively, and $866 and $2,950 during the nine months ended September 30, 2024 and 2023, respectively, and were included in services and fees in the condensed consolidated statements of operations. The carrying amounts included in the Company’s condensed consolidated balance sheets related to variable interests in VIEs that were not consolidated is shown below.
| September 30, 2024 |  | December 31, 2023
Securities and other investments owned, at fair value | $ | 3,948 |  |  | $ | 28,573 |
Loans receivable, at fair value | 34,895 |  |  | 250,801 |
Other assets | 3,532 |  |  | 11,418 |
Maximum exposure to loss | $ | 42,375 |  |  | $ | 290,792 |
Bicoastal Alliance, LLC (“Bicoastal”) On May 3, 2024, as part of the acquisition of Nogin, the Company acquired a 50% equity interest in Bicoastal Alliance, LLC (“Bicoastal”) through a wholly owned subsidiary of Nogin. Bicoastal is a holding company designed to manage the investments, including strategy and operations, for two brand apparel operating companies. The Company determined Bicoastal is a variable interest entity as it does not have sufficient resources to carry out its management activities without additional financial support. The Company determined that it has the power to direct the activities that most significantly impact Bicoastal’s economic performance, has more equity capital at risk, and is expected to continue to fund operations. Therefore, the Company determined that it is the primary beneficiary of Bicoastal and has consolidated its results into the Company’s financial statements. On August 14, 2024, Bicoastal entered into an agreement to acquire the remaining 50% equity interest upon paydown of a $700 note payable to the noncontrolling interest noteholder with a final repayment date and equity ownership interest transfer date of June 30, 2025. B. Riley Principal 250 Merger Corporation (“BRPM”) In 2021, the Company along with BRPM 250, a newly formed special purpose acquisition company incorporated as a Delaware corporation, consummated the initial public offering of 17,250,000 units of BRPM 250. Each Unit of BRPM 250 consisted of one share of class A common stock and one-third of one redeemable warrant, each whole warrant entitling the holder thereof to purchase one share of BRPM 250 class A common stock at an exercise price of $11.50 per share. The BRPM 250 Units were each sold at a price of $10.00 per unit, generating gross proceeds to BRPM 250 of $172,500. These proceeds were deposited in a trust account established for the benefit of the BRPM 250 class A public shareholders and was included in prepaid expenses and other assets in the condensed consolidated balance sheets. These proceeds are invested only in U.S. treasury securities in accordance with the governing documents of BRPM 250. Under the terms of the BRPM 250 initial public offering, BRPM 250 was required to consummate a business combination transaction within 24 months (or 27 months under certain circumstances) of the completion of its initial public offering. In connection with the completion of the initial public offering of BRPM 250, the Company invested in the private placement units of BRPM 250. BRPM 250 was determined to be a VIE because it did not have enough equity at risk to finance its activities without additional subordinated financial support. The Company had determined that the class A shareholders of BRPM 250 do not have substantive rights as shareholders of BRPM 250 since these equity interests are determined to be temporary equity. As such, the Company had determined that it is the primary beneficiary of BRPM 250 as it has the right to receive benefits or the obligation to absorb losses, as well as the power to direct a majority of the activities that significantly impact BRPM 250’s economic performance. Since the Company is determined to be the primary beneficiary, BRPM 250 was consolidated into the Company’s financial statements. On April 21, 2023, the Board of Directors of BRPM 250 approved a plan to redeem all of the outstanding shares of Class A common stock of BRPM 250, effective as of May 4, 2023. The BRPM 250 Class A public shares were deemed cancelled on May 4, 2023, and the funds held in trust were used to fund the corresponding redemption amounts to the BRPM 250 Class A shareholders and BRPM 250 was no longer a VIE. Contingent Consideration Contingent consideration is comprised of contractual earnouts or milestones in connection with the Company's purchase of businesses and is initially recorded as purchase consideration in the purchase price allocation with a corresponding liability at the acquisition date measured at fair value with valuation methodologies as described in Note 2(j). Subsequent changes in the fair value of contingent consideration during the reporting period are recognized in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. (p) Recent Accounting Standards Not yet adopted In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. This ASU requires additional expense disclosures by public entities in the notes to the financial statements. The ASU outlines the specific costs that are required to be disclosed which include such costs as: purchases of inventory, employee compensation, depreciation, intangible asset amortization, selling costs, and depreciation, depletion, and amortization related to oil and gas production. It also requires qualitative descriptions of the amounts remaining in the relevant expense income statement captions that are not separately disaggregated quantitatively in the notes to the financial statements and the entity's definition of selling expenses. The disclosures are required for each interim and annual reporting period. In January 2025, the FASB issued ASU 2025-01 which clarified the effective date for entities that do not have an annual reporting period that ends on December 31 st. The guidance is effective for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company has not yet adopted this update and is currently evaluating the effect this new standard will have on its financial position and results of operations. In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. The amendments in this update improve income tax disclosure requirements related to the transparency of rate reconciliation and income taxes paid disclosures and the effectiveness and comparability of disclosures of pretax income (or loss) and income tax expense (or benefit). The amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The update should be applied on a prospective basis. The Company has not yet adopted this update and is currently evaluating the effect this new standard will have on its financial position and results of operations. In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures. The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories included in each reported measure of a segment's profit or loss on an interim and annual basis. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The update should be applied retrospectively to all prior periods presented in the financial statements. The Company has not yet adopted this update and is currently evaluating the effect this new standard will have on its financial position and results of operations. Reclassifications Certain prior period amounts have been reclassified to conform with the current period presentation. Certain amounts reported in Inventory during the year ended December 31, 2023 have been reclassified as rental merchandise, net in the prepaid expenses and other assets note during the year ended September 30, 2024.

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