Burford Capital Share Discussion Threads

[djderry] 03/9/2022 11:52

LazG,you say litigation funders bear all the cost and risk.Correct.You then go on to say this incentivises plaintiffs to inflate their case for damages,etc.Correct. And this is your bear case?
Burford winnows out over 90% of all cases that apply for funding.One of their key attributes is the underwriting process ( whose members you refer to) which screens for,among other risks,litigation risk,judicial risk,legal risk,financial risk,duration risk,collection risk...Do I need to go on?
You say there is lots of competition.Correct.You then say higher returns are getting harder to get.Wrong.The company's ROI has increased.(There has been speculation as to why and the CIO has made a number of suggestions,see the last results presentation)
You say the Investment Committee has to rely on indirekt( sic) information case handlers who are employees and don't care(??!!) about results in 5 to 10 years when they've moved on.

When a case is finally accepted as meeting the various criterion ( and,as I have mentioned,it being a meritorious case is only one element and certainly not the decisive one)it is monitored by a member of the team who 'owns' it.Now,that's just a term,but here it means they report back on the case progress.The case,as you know ,is handled by outside lawyers hired by Burford's clients and is run by the client.
The 'employees' are all shareholders in Burford and,historically,have had bonuses tied to the outcome of cases.( And not to fair-value mark-ups).
(By the way,there are no bonuses tied to the value of a case accepted by Burford,although I understand you are not suggesting this.)
To say the committee is relying on indirect information is wrong.They receive all the court decisions.
The next criticism is that Burford is 'too focused on bonuses and salaries'
While I understand the tenor of the criticism,it misses the point.What makes Burford so valuable is its people and processes.The success of the company rests to a large degree on this in-house underwriting team.It is naive in the extreme to think this could be achieved by some newly trained bunch of solicitors.
And it shows up your contradiction:you claim employees won't care as they will move on ( presumably because of poor motivation/pay) and yet supposedly they are being overpaid. Make your mind up.
Finally,on a more general point,the timing of litigation outcomes does not fall into some neat six month or twelve month results schedule.

[three black crows] 03/9/2022 10:11

Another view on the share price
Muddy Waters took the price down to the mid 300’s
Then there was the delays and closed court system. Now we are waiting for the backlog of court cases to get through the system. On top of this we are in a bear market and entering a world recession.
While there may be good returns to come in settlements, they are not reported yet. Have a good look around , many other companies are showing a poor share price There needs to be more patience. Might see an uptick when we have the the decision on the Argentina case, providing its in our favour, but will still have to wait until the settlement is collected. I personally believe all the good is to come, but if you want it next week you might be disappointed. 2023 is my guess of a big turn around and also when we see a bull market returning again this may not be until 2023

[loglorry1] 03/9/2022 09:28

Totally agree with these bear points. There's absolutely no reason to value the book much above NAV unless and until they can show it throws off substantial cash *available for shareholders*. If excess returns on legal claims get gobbled up in all sorts of adjustments then this idea that they can generate 20% returns is false accounting, at least as far as shareholders are concerned.

I'm yet to be convinced but I remain open minded.

[williamcooper104] 01/9/2022 18:32

The bear is simple It's been jam tomorrow for a long time Covid legitimately delayed cashflows But covid is no more; so given the amount of cash out unless there's visibility reasonably soon to returns on that capital then the share price will suffer - never mind in absence of any news flow its beta will race ahead of a falling market That may well be unfair; but longer we go without major cashflows the more that sentiment will weigh on the sp

[riverman77] 01/9/2022 17:55

Agree about the huge salaries and bonuses eating up most of their winnings. While positive overall on BUR, this is the main thing holding me back and the reason I am keeping a fairly modest position. In this respect, not too different from the big investment banks, where employees inevitably take the lion's share of profits and the reason they have trended to be fairly lowly rated by the market.

[divmad] 01/9/2022 17:11

Clear as mud, I would say, judging by the last set of results.

[time_traveller] 01/9/2022 17:04

I said some of them. The very big but, for investor sentiment, is that they're doing a very good job of making the underlying business look not that profitable.

[divmad] 01/9/2022 17:00

You don't agree with the bear points mentioned, but recognise that the share price has underperformed since its listing. Hmmm .

[time_traveller] 01/9/2022 16:49

I'm not sure I agree with all those bear cases lazyG
Competition - Burford themselves have said they welcome competition in the arena. It would strengthen the industry, and there are far more good cases than can possibly be taken on.
Quality - again, the success rate is as good as we could possibly hope for.
But .. Salaries; yes, to again post losses, with so much of revenue being soaked up by pay and bonuses, was a very bad look and the share price has reflected that since the 1/2yr. Infact, in dollar terms, the share price performance has been abysmal since listing.

[chester9] 01/9/2022 16:40

Artem Fokin on bull casehttps://youtu.be/qBuH8pyc8Y0It's a year old but still relevant and splits business down well.The win loss scenario. It allows a two sided thought. That said short term a loss will a potential buying opportunity but long term this is a winner. That said most LTHs would all prefer no bump in the road.

[lazg] 01/9/2022 16:34

Let me give you a few bear case aspects of the litigation finance business as I understand it.

Litigation funders bear the cost and risk of litigation. This incentivises plaintiffs and their lawyers to overestimate their chances (its not their money at play) and to downplay the risks (again, its not their money).

There is quite a lot of competition in the space for lucrative claim portfolios, high returns are getting harder to get. Burford remains a top funder though, attracting very good law firms.

Allthewhile the costs for lawyers and economists go up, as the field specializes and the courts become more knowledgeable asking for everlonger briefs.

Burford has grown to a big size, which creates inefficiencies. Their Investment Committee needs to rely on indirekt information by case handlers, which are employees and therefore do not care as much about the result of the case in 5-10 years when they will most likely have moved on to a different job.

Burford is focussing too much on paying salaries rather than returns for investors.

Court cases drag on for very long periods, this may have the upside of interests, but the interest rates are currently lower than the inflation. Also the value of money now and later is the most important variable for profitablility.

Don't get me wrong, I am bullish, but there are some bear arguments to be made.

[williamcooper104] 01/9/2022 16:23

Unless there's positive news flow then the market is heading south and this has a high beta so will go sub 7 (IMO)

[saltraider] 01/9/2022 16:19

Agreed, DJDerry, the only bear commentary that I can see in recent posts seems to be simple deramping and is of no value. It would be interesting to hear the actual bear case.

[djderry] 01/9/2022 16:04

Any investor worth her or his salt will have a process in place to manage risk.Part of that involves examining the bear case but also exploring the unknown 'unknowns' as Donald Rumsfeld once put it.There is no substitute for meticulous due diligence.So let's hear the bear case.
There has been no reference to 'the other side of the coin',as you put it ,save for a comment about a falling share price.Which tells you nothing.

[sam55todd] 01/9/2022 11:27

At least someone talks about the other side of the coin, otherwise so many people here are completely grid-locked into "win" narrative and asymmetrically are discussing only one subset of possible outcomes based on it.

[time_traveller] 01/9/2022 11:06

Sub £7 or £8?
I would be surprised if we revisit sub £7 (or even sub 740), but if it did then the chart would be unattractive until about £6. Of course bad news could easily knock it that far, but the balance of probabilities is against that IMO. The sour taste of that second spoonful of red ink lingers, but will be a memory before long.

[lomax99] 01/9/2022 10:06

Down over 3% on barely 18k shares traded! Looking to pick more up sub £7.

[syoun2] 31/8/2022 09:16

Anyone have an opinion on what % of any win will be reported as unrealised gains. From memory about 700k already marked up so if they win say 3bn what would you expect them to mark up?

[djderry] 31/8/2022 08:49

Thanks again Chester9.

[chester9] 31/8/2022 07:05

SebArgentina has always paid but mostly because creditors initiated embargoes or asked the courts to apply injunctions on debt payments (Paul Singer). If Burford wins and does not put pressure, Argentina will likely kick the van down the road as much as possible.QuestionBut has there ever been a time when Argentina didn't eventually pay? And if it takes another 2 years, doesn't the payment accrue interest? I'd certainly want BUR to sell a % of the case in secondary mkt, but if they win, it's a pretty unique asset in today's mkt!SebJudge Preska will likely order Argentina to set aside some money in an Escrow Account. However, an appeal takes time and the losing side will probably seek an opinion to the Supreme Court.- As long as this case remains open, there's a risk that a judge/s could side with Argy.QuestionOkay interesting! I'd thought appeals takes away collection risk which is at least 'worth' half of the discount. Does that imply you think appeal is risky or very lengthy?SebThe value of cashing out will mostly depend on how much longer will the case last. Argentina could either appeal (another 12 months and then probably the Supreme Court) or start a long negotiation process. In the first case, the discount is much greater. QuestionThank you, good point. Assuming the market 100% discounts this scenario of cashing out, would you agree a sale would be worth 35 to 60 % of claim? (keeping aside for a minute the issue of how much the mkt would discount Burford's balance sheet cash)SebI strongly believe that, if BUR wins this thing, it will shop for buyers for the Eton case and cash in this victory. It will be a long time before Argentina actually pays and getting some award money with the ruling already in the books, will most likely help its market cap.QuestionShould Burford win the Argentina litigation, what percentage of claim value will the market assign to $BUR market cap in a win? My guess is 60 pct on the low end est. and 35 pct on the highest estimate

[djderry] 30/8/2022 22:37

Hi time_traveller.Obviously,I have no insights into the legal considerations that will feed into Judge Preska's decision making.But there are two defendants, YPF and Argentina. It's not inconceivable that the judge finds Argentina culpable and dismisses the case against YPF.Obviously,that's just one of a number of possible outcomes.

[time_traveller] 30/8/2022 21:56

If she rules that way, what's to stop governments expropriating foreign shareholders, selling on 1% to domestic shareholders, and declaring to courts "you can't touch us because we have private shareholders"?

[djderry] 30/8/2022 19:50

Thanks Chester9,appreciate that.I think there might be one that refers to 'Chris Bogart'also.
Obviously there's been a lot of experts' opinions flowing under the bridge but it's not beyond the bounds of possibility that Judge Preska decides that YPF were powerless in this situation.