Burford Capital Share Discussion Threads

[tsmith2] 08/8/2019 07:22

i mean no need for factual accuracy just a framing narrative will suffice because it suits your short position

[galatea99] 08/8/2019 07:21

At least three US law firms launching class actions against Burford:

[tsmith2] 08/8/2019 07:20

Given that one of Mr. Barnett's other funds was the largest shareholder of BUR, WE ASSUME this investment was made purely to perpetuate a mythical ROIC and IRR.

[1oughton] 08/8/2019 07:18

What reputation?Game over pal

[riverman77] 08/8/2019 07:18

They need to focus on rebuilding their reputation, not destroying Muddy Waters (although that would be nice).

[tsmith2] 08/8/2019 07:17

BUR's financing costs (including dividends) add another 8.3%. Therefore, in our opinion, the first approximately 16.5% of returns BUR's adjusted investment capital generates goes to keeping the lights on. BUR is arguably insolvent, as its debt and funding commitments greatly exceed the $880.3 million adjusted invested capital.since when did divis become a finance cost??

[tsmith2] 08/8/2019 07:11

It uses mark to market like Enron did sort of level Carlson stooped to in his interview..big rise today

[stoxx67] 08/8/2019 07:10

well, these guys are lawyers of the highest calibre ... they need to destroy Muddy Waters or they fall on their sword... its that simple.

[jonwig] 08/8/2019 06:57

Discussion on BBC R4 just now with Block (I think it was him) saying they'd been gathering evidence for a long time. The catalyst was that it's a "Woodford Stock", making it obvious prey.

Another interviewee, Russ Mould said MW had timed it perfectly for maximum investor jitters. Thought Burford would pull through with better governance.

[edmondj] 08/8/2019 06:15

Muddy Waters is a splendid name for a short-selling hedge fund that claims to spot accounting shenanigans at listed companies. Carson Block, its founder, doesn’t get it right every time, but he has a big following.

That partly explains the thumping 46% fall in Burford Capital’s share price after one of the hottest stocks on London’s alternative investment market received the Muddy treatment. Over 24 pages, the hedgie alleged “aggressive” accounting practices.

Burford Capital reacted with fury and, perhaps inevitably for a company that makes its living by funding other people’s court cases, said it had summoned lawyers and experts to investigate possible “market manipulation”.

It should calm down. Grumbling about short-sellers is pointless. These creatures may be unlovely but they’ve always been part of the stock market. The only effective defence is point-by-point rebuttal.

Burford says a detailed response will follow, and so it should. In April, the broker Canaccord, which is not in the shorting game, published a detailed report (much less feverish than Muddy Waters’s) that highlighted 20 “under-appreciated” areas of concern for Burford investors.

Canaccord acknowledged that the company was generating “attractive” returns from its “impressive, market-leading position” but challenged the claim of an 85% return on invested capital.

In other words, some of the accounting questions are not new. Burford can say, accurately, that it’s had a clean audit from Ernst & Young every year since 2010 but it can’t expect to settle the debate so easily. In the weird world of litigation funding, companies ascribe a present value to ongoing court cases, which leaves room to debate delicate areas such as cash returns versus paper profits.

Sir Peter Middleton, former chairman of Barclays, chairs Burford and should know the form. Maximum disclosure, plus full engagement, is the only option.

[devalpha] 08/8/2019 05:46

Lets see....

[hiraniha] 08/8/2019 05:19

I put a limit order in to buy for 2000 shares at 450 around 2.30pm yesterday and it eventually came through twenty minutes later at 445. As per my usual luck, it was heading south towards 410 soon after.Saw the price heading upwards at 3.30pm at around 480 pence, so sold all at best. Order eventually came through again twenty minutes later but at 545. I was completely oblivious to the RNS released by Burford Management at around that time. Pure luck.Christ knows how it works in the background at the moment but limit orders are crucial when it involves volatility like yesterday. Otherwise I feel market makers are quite happy to pull your pants down if you go in blind (ie. placing at best on your buys).

[stevoc1964] 08/8/2019 01:22

From this mornings Telegraph:-LEAD STORY'Bear raid' on Burford piles further woes on WoodfordEmbattled fund manager is caught up by attack on one of his major investments, which sees its shares slump     By Harriet Russell? and Michael O'DwyerNEIL WOODFORD suffered a fresh blow yesterday when one of his most successful investments, litigation funder Burford Capital, came under attack from short seller Muddy Waters, which accused the company of "egregiously misrepresenting" its returns.Burford Capital was a top 10 holding in Mr Woodford's now-suspended equity income fund. According to the latest available data, his funds still own more than 7pc of Burford.Muddy Waters claimed in a note published yesterday that Burford "is a perfect storm for an accounting fiasco" and that its "governance strictures are laughter-inducing".As a litigation funder, Burford puts up the cash to help costly legal cases proceed. Investors, such as hedge funds, agree to invest in exchange for attractive returns if the cases are won.The short seller also hit out at Invesco, Burford's largest shareholder and Mr Woodford's ex-employer, for what it called "unethical behaviour"."We also see Invesco fund manager Mark Barnett as having been equally complicit in ways reminiscent of some of the highly aggressive marking value techniques he and Neil Woodford have employed together," the report stated.It highlighted Invesco's relationship with Napo Pharmaceuticals, which was backed by Burford in a legal case.Invesco said: "We categorically refute any accusation of improper or unethical behaviour on behalf of Invesco or fund manager Mark Barnett."Invesco has been a long-term shareholder of Burford Capital and held investments in Napo since 2006. These investments were made and overseen in line with our robust investment and independent oversight processes. Invesco's legal advisers are reviewing the accusations and we expect we will be able to make a broader statement in due course." Woodford Investment Management declined to comment.Muddy Waters asserted that Burford relied on "a very small number of cases" for its returns.Responding to the note, Burford said its board "takes note of the short attack report by Muddy Waters, a firm known for such tactics, and believes that the report's criticisms are without merit". It added: "Burford will issue a detailed response to the report as soon as practicable and, following that detailed response, will also convene an investor conference call ... in due course."It said that directors would buy more Burford shares once a response to the Muddy Waters' report was published.Burford issued a stock exchange statement earlier yesterday, prior to the Muddy Waters' note, after its share price fell by almost a fifth on Tuesday on speculation that it was the subject of a cryptic Muddy Waters tweet.Yesterday, the company's shares halved in value to 561p. Analysts at Jefferies said they thought Burford should "seek longer-term remedies" by issuing more market updates.The fallout threatened to engulf the wider litigation funding industry.Shares in Litigation Capital Management fell as much as 28pc before recovering to be 5pc lower, while Manolete Partners fell as much as 21pc before ending 13pc down. There is no suggestion of any misconduct at either firm.LCM boss Patrick Moloney said: "LCM has consistently prepared its accounts and its return metrics on a conservative cash accounting basis. There is no fair value accounting in our numbers. We are committed to providing investors with the disclosure and transparency needed to assess the underlying basis of our returns and performance."

[mad foetus] 08/8/2019 00:44

I think it would also help if the company produced clean figures showing what their returns would have been if you excluded unrealised investments, and then showing how the valuation of unrealised investments compared, on a case by case basis, to the final amount they were valued at:
e.g. case 1) Committed £20m, yr1, valued at £20, yr 2 - £25, yr 3 - £33, yr 4, concluded for £0, £20, £200?
There is no reason why they could not do this for all of their investments.

[tsmith2] 08/8/2019 00:33

desperation when you say accounts misleading and almost in same breadth Enron..expecting big big bounce tomorrow https://www.investis-live.com/burfordcapital/5ccc6b08d0332d0e009eb382/lkkl

[mad foetus] 08/8/2019 00:28

well, the company have to come out with all guns blazing: a full riposte, news of a US listing, Bogart going on the board and preferably some very large strategic buys: gives that he and Molot raised £50m each from their previous sale of shares they have a great opportunity to go to Woodford and Barnett and ask how many they want to sell, and thus address that source of uncertainty.

From Liberum's note on the morning of H1 results:

The stock is cheap because it discounts a level of returns which is far
below that which it has earned over both recent and more distant
history
• The company has earned a 98% ROIC to date on completed
investments, 60% if you exclude partial realisations, but the share price
now discounts an immediate fall in future returns to 37%. Returns have
been 46% (pre H1) even if you randomly decided to exclude the
Petersen and Teinver successes.
• This is despite the fact that [1] the mix of its business has become more
positively skewed to complex cases where returns are higher now and
should remain higher in future and [2] the sovereign wealth fund deal
levers Burford’s return by 1.8x. Working in the other direction is capital
allocation to lower ROIC but faster cash-cycling business lines.

In the end the success or failure of BUR will depend upon whether it continues to generate a high ROIC. Ironically, one effect of the recent action is that it will probably make it more difficult to raise money on the markets (though perhaps SWFs will have a different view). That may slow down the rate of deployments but, you would hope, improve the quality still further.
There has been a clear sense that BUR have been trying to landgrab the litigation finance territory, not quite in the way that Amazon has in its areas, but growth and reinvesting capital has been the focus. But as we have discussed at length here, if you want that approach the US market better understands and appreciates it.

[gettingrichslow] 08/8/2019 00:23

Watching the Bloomberg video just now I have to agree with the earlier poster who said Carson Block looked uneasy. He didn't seem to be able to make a very compelling argument, citing that 2013 case (Napo?) again, which seems weak to me. I'd like to hear Woodford's views on Carson Block's arguments!!

[williamcooper104] 08/8/2019 00:11

Looking at debt in interim results Total Fair Value of debt is $661m (close to opening value of debt in note 14 of $647m) But total face value of bonds appears to be $699m So either Bur has amortised bonds or else it's actually putting the Fair Value of itsDebt and not the actual amount that it owes on its balance sheet If it is doing this, and I stress that I don't know if it is, then that would suggest that Bur might have taken c$40m of "income" to its P&L from a very questionable source What I do not understand is how their fair value of debt would be less than par value as Burs credit spreads should have tightened since it issued its bonds You would only, as far as I know, have a Fair Value of a loan at less than par value if your credit spreads have widened - eg the bond holders loss is, in theory, your gain and vice versa Fair valuing liabilities is something that banks did in the credit crunch (and were widely derided for doing so - I point this out only to make the point that if Bur have done it it's questionable accounting but not evidence of accounting misconduct) Anyway if debt is $700m then Bur needs $1.4bn of tangible assets

[momentum1] 07/8/2019 23:37

Read the 25 page report and in a nutshell Carson and his cronies are saying that BUR monetised some cases as best case rather than actual. So a case that runs for 2 years could be worth £2m or £2.5m and the company are taking the top figure. In defence of the company I must add that the actual and assumed figures are not materially different. Well not enough to warrant £1.5 billion being wiped off the market cap. Muddy Water have reduced their short position into close considerably and only holding 0.7% as per FCA website. Not a current holder but I must say this is looking very tempting down here.

[riverman77] 07/8/2019 23:30

I just had another read through the MW report and there really is nothing new or anything particularly damning. It is a very impressive report in terms of its detail and I can well imagine why people saw this and panicked.

They pick out lots of small individual cases which in isolation might look a bit suspect, but not in the wider scheme of things. There is the usual stuff about the CEO and CFO being married and other corporate governance irregularities - again not ideal but nothing new.

The bit where they say ROIC falls to 19% if you strip out the big 4 cases. Apart from the dubious premise that you can just remove their most successful cases to give a more realistic figure, this analysis fails to factor in that the last couple of years has seen a huge ramp up in new investments. So far, most of these won't have generated any profit - so this is hugely depressing their 19% figure

I could go on but I'm actually pretty relaxed about the whole thing as I think Burford are a very good company making strong profits. Sit tight and come back in a couple of years and see where the share price is then. There is no way I'm being scared into selling any of these off the back of this report.