Burford Capital Share Discussion Threads

[mad foetus] 10/8/2019 19:13

As for the viability of litigation funding, I know a thing or two. Twice I have been involved in litigation funds pre launch. On both occasions they failed to get enough funding, precisely because of concentration risk. It is hard for any new fund to raise more than £100m, and £50m isn't easy. But to do so you had to explain how you avoid concentration risk: getting a complex case to court can easily cost £10m, you need to keep money back for potential costs orders and cases can go massively over budget. So say £25m needed per case. With £100m you can fund 4 big cases. It doesn't take much for that to blow up: JIL showed that risk. But BUR now have a portfolio of over 100 cases. MW say that most of the returns come from a few cases. Yes, but the other side is that the downside risk is split among many cases. A small victory won't make a huge difference to returns and many of the cases are small victories. But a total loss - unless it happens in Petersen- doesn't give much downside risk either. And if, every 5 years, a Petersen or Tienver comes along, great. Of course, the more cases you fund, and the more selective your process, the higher the chance that you pick up an outlier.

[mad foetus] 10/8/2019 19:00

Blah blah has hit the nail on the head. There are lots of rules expressly designed to prevent people from taking a position and then attempting to move the market in the direction of their trade. Isn't this precisely what the City Slickers from the Mirror were jailed for? Once you publish detailed research you have a duty to be fair and honest and to not be misleading. I would say at the minimum that requires you to contact the company and ask for comments on your allegations. If they do not engage then publish and say that you tried to seek clarification from the company but none was forthcoming. And if the company seeks an injunction it doesn't matter: if comment is fair the court will allow it, if not, and the court issues an injunction the bears can continue with their shorts and in the end, the facts will out.But in this case what happened?1) MW took out a short2) MW said they would publish details of a big new short against a company that was arguably insolvent 3) A number of people on social media reported "rumours" that BUR was the target4) MW closed most of their short5) MW published their research6) BUR responded to the researchIf anyone thinks that is how a fair and transparent market is supposed to operate then they are unfamiliar with the trends of the last 20 years of regulation. For once, the FCA will have to act.

[gusrezo] 10/8/2019 18:43

but if Gotham's Daniel Yu account in Twitter is actually @LongShortTrader , as for example the FT published time ago, , then he has already published a thread the past days about his view on litigation finance as a opportunistic field but not a viable permanent business due to the uncertain timelines and cash flows, as he wrote time ago in his Acacia report:

[blah blah] 10/8/2019 18:42

Edmond - I’m not sure what you are asking. Are you looking for a research report that doesn’t have a disclaimer? If so I can’t think of any I’ve ever seen. Certainly nothing that runs to 25 pages like the MW report.

[edmondj] 10/8/2019 18:34

Can you specify any sell-side research note that *doesn't* include the regular disclaimer how the investment bank/broker 'may hold positions in the above-named securities'?

They could at least clarify, in the interests of a fair market, but the financial establishment is well capable of muddying the waters itself, when that suits its interest. With the regulator's blessing.

[dsmith57] 10/8/2019 18:32

What we really need now is for some of the big hitters who have recently reiterated shareprice targets up to £26 to come out and give the company their full backing, comment on Muddy Waters’ methodology and restate their price targets. Some authoritative, independent comment backing Burford’s own analysis would be superb and might allow things to get back to something approaching normality here after the most tumultuous few days that I can ever remember.

[blah blah] 10/8/2019 18:26

Providing research is a highly regulated activity. Just look at all the disclaimers on your average research report, most of the time the disclaimers are longer than the research. There is a good reason for that - if you are going to provide information that moves markets you have all kinds of responsibilities, not to be unduly influenced, to distribute to all parties at the same time, not to trade ahead of publication etc etc.

Then look at these short reports - they claim not to be research but instead commentary, which means they don't need to comply with all the rules, and can disclose selectively ahead of publication and trade in the stocks mentioned. Yet there is no doubt that this 'commentary' does move markets. Even a rumour of a report moves markets, as we have seen this week. This activity needs regulating, I'm not pretending I know exactly how, but the regulator is miles behind the short sellers and they need to get a grip.

[goodbloke1] 10/8/2019 18:20

I agree Charles.Been out most of the afternoon and they are still at it lol.Never seen so much desperation to try and feed a short!

[the ghost who walks] 10/8/2019 18:19

Not strictly true, if you read any hedge fund quarterly portfolio letter they will typically indeed go into detail on their favourite long position, thereby "publishing" their research.The publication is a red herring - it's a view and ultimately will be proven correct or incorrect. You don't have to sell at this price, and you don't have to buy.

[blah blah] 10/8/2019 17:50

I do wonder how much people who think they know how the market works, actually do.

Research notes are published by the analysts of sell side banks - e.g. Morgan Stanley, Barclays, Peel Hunt and the like.

These brokers do not invest in these shares, or if their firm does invest in the market they have zero ability to influence which stocks are covered or what the research says. If you think differently then go ahead and name an instance and the FCA will be all over it to issue a multi million dollar fine.

The investors are the buy side. They are the likes of Standard Life, Aviva, Invesco, Schroders. These firms do not write research notes.

So MF's question still stands - name a long investor who publishes research? Not just some passing reference in a newspaper to what stocks they hold and why, but proper research?

[syoun11] 10/8/2019 17:49

share prophets announced gotham involvement

[syoun11] 10/8/2019 17:49

share prophets announced gotham involvement

[bbmsionlypostafter] 10/8/2019 17:34

mad foetus
10 Aug '19 - 17:15 - 9238 of 9240
0 0 0
........Name me one long investor who publishes research?

LOLZ. You're kidding, right?

[mad foetus] 10/8/2019 17:19

And it isn't about questionable behaviour. It is about whether there has been a breach of regulation and legislation that is drafted in the widest possible terms, and also of what degree of duty does a professional financial services business that publishes information in relation to a company owe to that company and its shareholders.These are legal questions. The answers are possibly unclear, but this case is so high profile that the FCA will probably have to take steps in order to clarify the position one way or the other.

[mad foetus] 10/8/2019 17:15

Going short is fine. It is acting in concert and combining public research with investment that is the problem. This isn't novel and is why there is tons of legislation to stop itName me one long investor who publishes research?

[williamcooper104] 10/8/2019 17:13

Yep - Carillion was as bust as you could possibly be Near nil recovery for senior creditors Suicide margins on complex construction contracts Bidding work to get the cashflow

[williamcooper104] 10/8/2019 17:11

You don't need to look much further than Woodford and Invesco for potentially questionable behaviour

[edmondj] 10/8/2019 17:09

So when the hedgies piled into Carillion and later Kier (useful red flags of underlying high risk, for long-only investors) that was 'market manipulation'?

And when a collective of brokers publish 'buy' notes, not wholly unconnected with seeking a commercial link to raise capital for the firm in question, that's OK?

[dm2000] 10/8/2019 17:06

Taken from what you just posted...read it carefully. and seriously considered publicly sharing its opinions about Burford, in the form of a Gotham City Research report. For a variety of reasons, it did not.

[dekle] 10/8/2019 17:05

Losing on the market doesn’t affect my sleep but the threat of litigation might.