Burford Capital Share Discussion Threads

[yidarmytom] 14/8/2019 07:09

Muddy Waters’ Latest Target Is Missing a Big Point

[nobbygnome] 14/8/2019 07:09

The major point in SK's mind is clearly the case in 2014. I don't understand why one bit of dodgy corporate governance 5 years ago means the company in 2019 should suddenly be worth half of what it was last week.

Yes I know there are other issues but that is what he is banging on about continually....

[shanklin] 14/8/2019 06:38

Whatever level of trust one has in BUR, it is evident they have gone out of their way to ignore UK governance norms, however sensible or arbitrary many of these norms may be... ...and however much they may or may not be flouting US governance norms.

Provided, there is no fire at BUR, to go along with the MW smoke, I don't see what harm there would be in BUR moving to be less out on a limb on:
- changing auditor
- changing the board composition
- getting away from the botched appointment of the CEO's wife as CFO without informing the market at the time.

BTW, good to hear about Charles Utley, who seems entirely appropriately qualified in terms of heading the finance function internally, whilst the CFO does the PR.

[galatea99] 14/8/2019 06:20

"Andrew Bailey’s FCA watchdog failed to bark on Asset Life"

"Burford home truth
Incorporated in Guernsey, run from America, listed on Aim. Talk to Burford Capital boss Christopher Bogart and there’s no sense he’s in any rush to overhaul the company’s “laughter-inducing” corporate governance — as short-seller Muddy Waters put it. Pointing out that Burford is merely listed in London, Mr Bogart says that “doesn’t mean we are obliged to follow all the UK governance rules”.

Maybe not. But surely even he can spot one problem, when the accounts are being scrutinised as never before — having his wife as the chief financial officer? Not that the announcement of Elizabeth O’Connell’s new role in December 2017 even mentions she is his wife. It also raises other questions. Muddy Waters’ Carson Block said Burford had “cycled through” four former finance chiefs or senior finance managers since 2013, asking waspishly: “Is Elizabeth O’Connell the only CFO who can be relied upon to approve the accounts?”

Mr Bogart dismisses that as “innuendo”, says the former quartet weren’t senior finance managers anyway and that Mr Block was deliberately giving a “false” impression by omitting to note that Burford also has a “chief accounting officer”, Charles Utley, who joined from Barclays in February last year.

But ask Mr Bogart who was in charge of Burford’s finances until his wife took the job and he dissembles, merely saying she’s “been in the business since the company was founded”. And Ms O’Connell is only a “chartered financial analyst”, not a chartered accountant. To boot, the four-strong board and auditor EY are unchanged since Burford was founded a decade ago. So where is any independent oversight of the figures? A new finance chief from outside the group is long overdue."

[tracy_moore] 14/8/2019 05:56

Williamcooper10413 Aug '19 - 23:55 - 10474 of 10476
0 0 0
Another good Buffet saying - invest in businesses that can be run by idiots because one day they will be

Whatever Burford is it cannot be run by idiots

That's SK remaining unemployed then :-)

[williamcooper104] 13/8/2019 23:55

Another good Buffet saying - invest in businesses that can be run by idiots because one day they will be Whatever Burford is it cannot be run by idiots

[henchard] 13/8/2019 23:41

SK,

"And the timeline:

25 Feb 14 Napo lose jury verdict
31 Mar 14 BUR release 2013 results booking Napo as complete (it was when accounts released) with big bucks return. 2013 is another profitable year - just but would have been a loss without Napo booking.
21 Jul 14 Bonds launched
29 Jul 14 Bonds close early due to demand
10 Oct 14 BUR investment converted to debt in Napo
3 Nov 14 or earlier "Miriam Connole, Burford's CFO, has left Burford to pursue other opportunities." No we would like to thank blah blah, just lots of details of who is now covering the role."

Doesn't look great for BUR's integrity at first blush.

[henchard] 13/8/2019 23:36

Devalpha

On the subject of trust ...

I tend to agree with you about Molot. He came across as not very enigmatic or entirely comfortable on the conference call, but I don't mind that. He seems very focused on the cases in a quite narrow, nerdy kind of way, which I think is what you need in that role. BUR's Ajit Jain at Berkshire? I could go along with that. But, from your post, you seem to be pinning your trust and money entirely on Molot.

However, to continue the Berkshire analogy, I think you need - on the trust front - Bogart and O'Connell as Buffett and Munger, and I'm far from convinced they are.

[gettingrichslow] 13/8/2019 23:17

How much are you down SweetK? Come on, be honest?

[sweet karolina2] 13/8/2019 23:14

Henchard,

Whilst I agree with "A lot of frauds don't start out as frauds, but become frauds"

And the timeline:

25 Feb 14 Napo lose jury verdict
31 Mar 14 BUR release 2013 results booking Napo as complete (it was when accounts released) with big bucks return. 2013 is another profitable year - just but would have been a loss without Napo booking.
21 Jul 14 Bonds launched
29 Jul 14 Bonds close early due to demand
10 Oct 14 BUR investment converted to debt in Napo
3 Nov 14 or earlier "Miriam Connole, Burford's CFO, has left Burford to pursue other opportunities." No we would like to thank blah blah, just lots of details of who is now covering the role.

Could be where it started.

However, given:

"The position of the CFO was questioned, not only due to her relationship with the CEO, but also concerning personnel turnover in the role. As we had understood before, Elizabeth O’Connell has effectively been in the job since Miriam Connole left at the end of 2014." Source Jefferies and

"Elizabeth has been at Burford since the beginning and involved in accounts prior to 2014" Source brexitplus.

and MW's revelation on how early BUR adopted its interpretation of IFRS 9 (through pseudo gritted teeth) in 2011.

could BUR be one of the exceptions to "A lot of frauds don't start out as frauds, but become frauds"?

All assuming of course there is not a proper innocent explanation of what really happened, as the one given in the rebuttal, IMHO, really does not hold water.

[gettingrichslow] 13/8/2019 23:03

She is also all over the place with her criticisms of BUR:
- not responding quickly enough
- too quick to respond!
- too defensive
- shouldn’t have gone on the offensive against MW!
- not answering the challenges
- answering the challenges in too much detail!

[hawkind] 13/8/2019 23:01

What a brilliant post Devalpha.It should always be recognised that sensationalising negative headlines is just lazy journalism to get clicks. Negative news attracts people unfortunately whether factual or not.A little bit like advise to a footballer who has a bad match, do not read the morning newspapers that over exaggerate the performance to sell papers. It's the same with shares, the worst thing is to Google after a short attack that may influence someone to make a bad decision on sensationalising.

[sweet karolina2] 13/8/2019 22:58

Ah yes found it posted at 8719



Courtesy Jefferies via FT Markets Live:

"The position of the CFO was questioned, not only due to her relationship with the CEO, but also concerning personnel turnover in the role. As we had understood before, Elizabeth O’Connell has effectively been in the job since Miriam Connole left at the end of 2014."

and brexit's most helpful contribution:

brexitplus9 Aug '19 - 12:50 - 8735 of 10464
0 3 0
Sweet K

Clutching at straws methinks.

Please report correctly. Elizabeth has been at Burford since the beginning and involved in accounts prior to 2014

[gettingrichslow] 13/8/2019 22:57

She has no life at all. Remember she has no position here!! I mean, seriously, imagine posting 16 hours a day on a discussion board of a company you have no position in!!?? I’ve got many 10s of k in numerous companies that I haven’t posted about for months!!

[borg45] 13/8/2019 22:47

How's your short doing haha

[senn1] 13/8/2019 22:46

sweet Karolina

-have you got a life???

[sweet karolina2] 13/8/2019 22:41

MF,

Yes that is what has been bugging me and I just could not put my finger on it. The massively elaborate explanation on Napo which had them coming out as super heroes, except they really did lose most of what was booked back in 2013 and just snuck the change to figures into H1 2019. Just did not quite ring true or was it too good to be true. Why are they so defensive about Napo? Surely it was ages ago, it is the nature of the business that defeat is sometimes grasped from the jaws of victory, why not just say it was one of those things and leave it at that?

It was winsome's post that finally made it all click:

"sk there is an argument for using BUR's accounting model in the early years of such a company when cash settlements from investments take a number of years to realise but you want to show your company is growing those assets and potential profits. Then you attract more capital investment as BUR has done."

A quick google search to find when the jury trial handed down its verdict and it all fits:

25 Feb 14 Napo lose jury verdict
31 Mar 14 BUR release 2013 results booking Napo as complete (it was when accounts released) with big bucks return. 2013 is another profitable year - just but would have been a loss without Napo booking.
21 Jul 14 Bonds launched
29 Jul 14 Bonds close early due to demand
10 Oct 14 BUR investment converted to debt in Napo
3 Nov 14 or earlier "Miriam Connole, Burford's CFO, has left Burford to pursue other opportunities." No we would like to thank blah blah, just lots of details of who is now covering the role. Where did I read that Liz has been defacto in the role ever since Miriam left?

[devalpha] 13/8/2019 22:25

On the subject of trust....my trust in Bogart and Molot has gradually built up ever since I first invested in Jan 2017. I've read all reports in detail and been on all calls, and generally lived and breathed the company, as I tend to do with anything I put money into. Trust will always be a blend of the objective with the subjective. To give an example, on last week's call, Jon Molot impressed me with his what I believe were very genuine opening comments on how sorry he was for the investors, particularly those that had sold into the steep fall. No criticism of these people, just his genuine thoughts and concern. He also made a very revealing comment when he discussed his personal oversight of the Burford investment team.. he has personally overseen (rubber stamped or vetoed) every investment decision Burford has made to date. He went on to say that despite Burford's multi £Billion market cap, that due to the small number of employees they still were in effect able to operate as a small co in terms of his oversight of the investment team and all final decisions. This may seem an innocuous point, but think...you have this straightforward multi talented, highly qualified legal mind able to oversee every investment decision despite the current market cap. His team are heavily involved but he's making the final calls. For anyone who's not aware of Jon Molot's credentials, I urge you to look him up and draw your own conclusions. I draw an analogy with Ajit Jain at Berkshire Hathaway here. Burford are a minnow compared to Berkshire but Jain has built Berkshire's reinsurance business from little to the most respected in the world through a similar approach. A multi talented honest, straightforward insurance operator managing a small team, being personally involved with every insurance decision over the last 30 years taking the business from near zero to where it is today. I see parallels in the culture and approach between Jain and Molot. You ask where my trust comes from?...there's an example. My heros are Buffet and Munger and their top man is Jain. I see similar traits in Jon Molot's operating methods. His share purchases send out the correct message too, substantial and I suspect there's more to come. He's aligning himself with all impacted shareholders. What also builds further trust for me is the calm assault on Block's ridiculous accusations, and clear intention of fighting their corner honestly and astutely. You can see the sentiment gradually changing here...Googling Burford at the weekend gave a series of sensationalised press headlines suggesting Burford were doomed. The same search carried out on Monday night after what I believe were astute RNS's on Monday morning gave headlines more favourable to Burford. These things shouldn't matter but of course they do. I had an interesting game of email tennis with a broadsheet journalist on Sunday...very revealing. I suggested he probably hadn't heard of Burford prior to the events of last week. He clearly had never read any Burford interim or annual report. He told me that Burford reports were lacking in detail because they were an AIM company. Clearly just jumping on the bandwagon. If he'd had read even one he would have acknowledged the high level of detail, which they've been recognised for. When I challenged him on his level of knowledge of % markup of unrealised gains, timing of these and write down history of these gains I got no real response. The sensational story was the easy and popular one to write,not the factual one. This was common over the weekend and lead to negative scaremongering into Monday morning,but I sense now the sentiment is changing. Let's see where we are with sentiment at the end of next week. Who would you trust, Carson Block with his methods and character or a company with someone of the calibre and character of Jon Molot overseeing all inv decisions? Block's picked a fight with the wrong crew here. Good luck to all with a genuine interest.

[henchard] 13/8/2019 22:14

sk,

I'm a bit busy with a lot of other stuff at the moment, and only working through the BUR historical details in spare time. You're probably ahead of me. I thought the BUR Napo response on the conference call was really iffy but haven't looked into it yet. Doesn't look good on the face of it, I must admit.

[mad foetus] 13/8/2019 22:11

They have answered the Napo claim. The whole point is that BUR are at all times looking how to reduce their risk and add value to their investment. BUR made a profit, what exactly is the issue here? Surely you should be saying that their case management skills are brilliant if they can fund an apparent losing case and still, by the way they structured the deal, make a profit. Isn't that the proper response?

Anyway, from the horse's mouth:

Napo was a fledgling US biotech company. It entered into an agreement with a larger pharmaceutical company, Salix, to develop and market its flagship drug. Napo believed that Salix breached the agreement and sued for damages and the return of its rights to the drug. As Napo's case proceeded, it sought litigation financing from Burford.

One of Burford's hallmarks is to do deep diligence on its potential investments and seek structures when appropriate that are as principal protective as possible. Thus, Burford structured its financing agreement with Napo so that its recovery could come from not just Napo's dispute with Salix, but from other litigation as well.

As it transpired, a litigation matter other than the Salix matter resolved first, and resulted in an entitlement for Burford. That is the figure shown in Burford's 2013 reporting.

The Salix matter continued through the litigation process; while Napo lost at trial, a strong argument on appeal was available. At the same time as this litigation was proceeding, however, corporate events were underway at both Napo (which wanted to divide itself into a human and an animal health business) and Salix (which was being acquired by Valeant). In the end, Burford restructured its financing arrangements with Napo to become entitled to certain fixed payments and to give Napo greater flexibility to reorganize its business, and Burford no longer became dependent on the results of the Salix litigation for its further returns.

[henchard] 13/8/2019 22:06

molatovkid

10 years is nothing.

Globo: founded 1997 - CEO and CFO did a runner 2015.

A lot of frauds don't start out as frauds, but become frauds, and even as they do so retain often significant kosher elements to the business, which is why they often take a good deal of time to unravel.

However, let's not get too distracted from BUR. As I say, I think BUR will take steps to enhance investors' trust.

[sweet karolina2] 13/8/2019 21:59

Henchard,

What is your take on the Napo case actually having concluded as a loss BEFORE 2013 accounts were published.



And the money being booked, without it 2013 would have been a loss, and then issuing bonds in Jul 2014?

Does the FACT that Napo trial was lost in Feb 2014 and 2013 accounts were published in Mar 2014 tally with BUR's rebuttal?

As it transpired, a litigation matter other than the Salix matter resolved first, and resulted in an entitlement for Burford. That is the figure shown in Burford's 2013 reporting.

And what is your view on why the other "entitlement" that was booked was also wiped out when the accounts were finally corrected in H1 2019?