Litigation Capital Manag... Share Discussion Threads

[bigbaggy] 08/7/2022 09:16

Sadly I think I’ve had it here. This is the most “jam tomorrow” stock I have seen in a long while. Not sure the stock market is the right place for a company with a 4 year case duration, having told us for years that it’s a 2 year duration. Feel a bit misled tbh. Time to take a loss here. Best of luck to all.

[scubadiverr] 08/7/2022 09:06

I was expecting much better after all the PDMR buys. I certainly wasn't expecting a fall on update day and can understand the markets reaction to a point, but think it is silly and presents an opportunity. I think the RNS is too clear and too honest, if that can ever be a critism, and that the sellers simply don't understand litigation finance. But maybe its me that doesn't understand? Time will tell. I'm very tempted to sell a small amount of my Burford to add here.

[adamb1978] 08/7/2022 08:41

Why do you not think court delays would get worse? I cant understand that if whatever backlog is slow to burn off but not clear to me why it should get worst

[adae] 08/7/2022 08:26

The counter to that is - are things getting worse or better? That reads they're getting worse, with not even an outlook statement.

The longer cases are taking, the higher the costs, and the more delayed the returns.

Same should apply to all of them eg BUR.

[djderry] 08/7/2022 08:13

Market is not thrilled with the update.Of course we know earnings are lumpy,it comes with the territory.The two matters which are taking a bit longer are no big deal.The guidance regarding cases taking up to four years is perhaps what's spooking the market.Their portfolio is probably too small to do the kind of probabilistic modeling that Burford does.

[stockstockham] 08/7/2022 08:03

Warning, with no outlook. Can't see court delays improving near-term, more likely to get worse.

[greenknight1] 06/7/2022 16:14

LCM website states - fees will range from 15% to 40% depending on the level of risk we take on and the potential rewards of the claim. A win of this magnitude would provide us with between £110mn and £295mn. This win in itself exceeds the market cap. Crazy potential here.

[farnesbarnes] 06/7/2022 16:01

Karry Lai July 05, 2022
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Singapore expands litigation funding scope for insolvency cases

The permitted scope of third-party funding in corporate insolvencies is set to increase, enhancing the country’s appeal as a dispute resolution and restructuring hub
In a much-awaited move, Singapore has broadened the use of legal financing in corporate insolvency cases through the Castlewood Group case.

With the permitted scope of litigation funding now expanded, local litigation lawyers and funders have said the move would solidify Singapore as a dispute resolution and restructuring centre, thereby increasing its international appeal.

In the Castlewood Group case, the court allowed the liquidator to pursue litigation using funding raised by a subgroup of Castlewood’s creditors. If the liquidator’s recovery efforts are successful, the creditors may receive higher returns.

“While third-party funding by professional funders has been permitted for insolvency cases for a few years, the Castlewood case has expanded the law by determining that existing creditors providing funding can now get enhanced returns in the way third-party funders were able to in recent years,” said Roger Milburn, investment manager at Litigation Capital Management.

“The Castlewood case signals that the Singapore courts are incrementally more open to litigation funding,” added Quentin Pak, director at Burford Capital.

For Milburn, the Castlewood case will change the industry if a secondary market develops whereby sub-groups of creditors who have agreed to finance the claims of an insolvent estate, in exchange for enhanced returns over other creditors, seek to lay off some of their risk and the financial burden to professional funders.

“That could be an interesting development, but whether it would be attractive to funders is another question,” he said. “It would very much have to be considered on a case-by-case basis, with a particular focus on whether the economic metrics of such an arrangement would make the claim in question viable for all parties involved.”

Meanwhile, Blossom Hing, director of dispute resolution and corporate restructuring and workouts at Drew & Napier, said the most important takeaway from Castlewood was that insolvency holders appointed pursuant to the Companies Act would not be able to sell or assign the proceeds of causes of action arising in liquidation under certain sections of the act. “The position has now changed under the Insolvency, Restructuring and Dissolution Act (IRDA) as sections 144(1)(g) and 177(1)(a) have conferred new powers onto insolvency office holders to sell or assign the proceeds of certain causes of action, which vest in them personally,” she said.

Under the insolvency regime established by the Companies Act, the court also decided in the Castlewood case that the proceeds of claims pursued by the liquidator would be assignable property. “Creditors in liquidations governed by the Insolvency, Restructuring and Dissolution (Assignment of Proceeds of an Action) Regulations 2020, where this is statutorily provided, and those still governed by the Companies Act, can therefore potentially avail themselves to funding arrangements through which they may enjoy priority in respect of monies recovered by liquidators,” said Mark Seah, senior partner at Dentons Rodyk.

See also: Chinese developers turn to Cayman and BVI schemes in offshore bond restructuring

Considerations for litigation funding

There are also a number of considerations for litigation funders to consider when faced with an insolvency case.

Given the nature of insolvencies, one of the reasons litigation funding has not been used frequently in Singapore is that it is often difficult to identify from the outset which meaningful assets can potentially be recovered. “Funders need to look at the risk profile of the case and may have reservations on investing if the path to recovering meaningful amounts is risky,” said Pak. In cases of fraud, there is even less visibility on how much can be recovered, as the assets are hidden.

“One key commercial consideration for a solvent company is whether to leverage on litigation funding to effectively take a matter off its balance sheet,” said Seah. “Funding is one of the tools available to companies to better manage risks and their litigation spend.”

Unlike litigation funding in jurisdictions where litigation funders have some degree of control over the proceedings, in Singapore, it is the insolvency office holder who retain control and oversight over the conduct of the litigation and must not take instructions from the litigation funder. “Further, there can be no expectation of confidentiality over the funding arrangement and the litigation funder must be prepared for its identity to be disclosed to court and all parties concerned at the start of the proceedings, or when the funding agreement is entered into,” said Hing.

Obtaining a priority over secured creditors should also be considered, although this is something a funder should be mindful of in any funding scenario, added Milburn. Beyond that, there is the question of whether a court approval of the arrangement is necessary as a prerequisite to funding.

Despite IRDA making clear that judicial managers can use third-party finance to pursue claims for the company they are appointed to and are trying to rehabilitate, there has not been much activity from such office holders. “Our experience in the insolvency arena is almost exclusively with liquidators seeking funding for a company that is already dead,” said Milburn. “This is a little surprising: surely if there is a choice between using the limited funds of a company under judicial management to take the risk of pursuing claims, or using that cash to perhaps save additional jobs and focus on revenue-creating activities, the opportunity to do both by using legal finance for the claims should be a no-brainer.”

While the Singapore courts have been supportive of expanding the use of litigation funding in case law, it is down to the willingness of insolvency practitioners themselves to use this tool to maximise the recovery of assets.

See also: Hong Kong SAR’s insolvency decision demonstrates cooperation with Chinese courts

Beyond insolvency

Litigation funding in Singapore is growing in prominence, and apart from insolvency cases, third-party funding and conditional fee arrangements have already been allowed for arbitration cases and related court proceedings and mediation.

Funding is generally on an upward trajectory in Singapore, which has positioned the country as an increasingly attractive hub for dispute resolution and a restructuring. The latest scope extension for third-party funding has further levelled the playing field between Singapore and other jurisdictions, as well as increased the use of this type of funding for domestic arbitration.

“The government is likely to take a holistic approach as it deliberates the next steps, monitoring the impact of the changes that were made to the third-party funding framework last year, and more recently, those relating to conditional fee agreements,” said Seah. “However, funding is less likely to be permitted in the near future for criminal or family law cases, which engage wider concerns.”

See also: First recognition order by Chinese court under HK and PRC insolvency arrangement

Litigation funding also continues to play a key role in enhancing access to justice in Singapore. “High-value litigation naturally comes into focus, but any further expansion to allow funding outside of the Singapore International Commercial Court would still have to be balanced against concerns associated with commoditising claims,” Seah added. “The balance might be struck by potentially limiting the proportion of claims to be funded or by taking a sector-driven approach.”

According to Hing, it is likely that litigation funding will be further liberalised in the coming years. “Given that third-party funding has already been allowed for arbitration proceedings, the next step would probably be to consider liberalising funding for court proceedings in commercial cases,” she said.

A major outstanding roadblock, however, is regular high-court litigation. “Unlike in other areas, there has been no overt green light to allow funders to assist clients with domestic high-court claims in Singapore,” said Milburn. “This is arguably a barrier for access to justice for parties who cannot afford to pay their lawyers without outside assistance. There is also demand from certain parties to use external legal finance for court cases as a means of managing risk and cashflow considerations.”

[farnesbarnes] 06/7/2022 15:55

What percentage of LCM claims actually make it to court hearing? I should imagine with their success rate that this is quite low.

Good find Flagon, thank you.

[johnwig] 06/7/2022 12:06

Thanks for that Flagon. Very interesting.

[flagon] 06/7/2022 09:19

GreenX metals (was Prairie Mining) litigation update ...

[waterfall city] 05/7/2022 10:07

A good article on yahoo finance, the only negative was the lumpy earnings but you would think that would even itself out more once you reach a certain size.

[bigbaggy] 04/7/2022 16:32

They seem to be listening - now up 2% :-)

[74tom] 04/7/2022 16:25

Was going to post the same thing earlier - the supply and demand simply makes no sense here. Even stranger, I can now get a quote of 94p for 50k shares, but it’s 96.7p for 55k…

Where are the shares coming from to fill the 50k quote at 94p? There’s nothing on the order book & surely that 52k buy this morning should have some sort of impact?!

[farnesbarnes] 04/7/2022 15:54

WTAF - a 50k buy and 25k worth of sell, and the share price drops 5%?

[johnwig] 01/7/2022 16:07

Thanks for that, Tom. I thought it was just me who didn't understand. We're used to the knowalls touching the side of their nose and whispering "it's the market-makers, silly." But surely market-makers have to act occasionally in a logical fashion. Or are they hobgoblins on furlough from some nefarious day-job?

[74tom] 01/7/2022 15:13

"However I find the daily/hourly movements of LIT are utterly imponderable"

I couldn't agree more Johnwig, of all the level 2 dashboards that I keep track of LIT is by far the most bizarre. It's unusual for it to open at the same price is closed the day before, more often than not it's pushed lower by sell orders on the book. Regular 'O' trades don't seem to make any difference unless there is news, only AT trades can shift the book higher. However, you also get situations where significant buying leads to a downward move in the order book - this is something I simply don't understand.

The price does seem to be trading in an ever narrowing symmetrical triangle pattern which comes to a point at 97p in early September. Given the fundamentals I'd be surprised to see a break downwards without bad news, certainly the odds must favour a move to the upside.

In the meantime it's a waiting game, there is usually a full trading update in early July so we should have news very soon.

[johnwig] 28/6/2022 15:22

As it happens in my joky animadversion I was referring to the fact that you don't have to buy many shares in LIT to move the share price. During the few days surrounding my post, buying and selling a 100 shares seemed to be enough to see a movement of a penny or more either way. Therefore if not a cheap date then definitely a cheap day excursion.

I have, for my sins, plenty of experience first-hand of corporate actions which usually had an effect on the share price one way or another. However I find the daily/hourly movements of LIT are utterly imponderable. I think one has to spend much time studying, for example, the changes in spread on no volume, say, to explain them. I neither have the time nor the inclination to do so. But I know many people on these threads who are very expert, it seems. I would welcome their views.

Maddox, I do agree with what you say on the general prospects of LIT and believe that the more secular movements portend well for the share. AS ever with this share I could not resist further recent buying: I hold far too many for any vestige of portfolio balance. I'm now feeling a little impatient....

[maddox] 28/6/2022 12:30

Johnwig,

Definitely cheap. A p/e of 5 and PEG 0.1 and c. x1 the value of their case investments. There is huge hidden value in LIT. Add to that the rapid expansion of the funds under management - we have an attractive combination of value and growth. A feature of litigation finance is that the time-frame for the crystalisation of this value is highly uncertain - which is probably the reason for the low valuation.

One of Charlie Munger's pearls of wisdom is that it is very unlikely that a firm's share price performance will exceed its financial performance over the long-term. I think the reverse also holds true.

From the 1H22 results: 'During the 10 and a half year period we have evolved from being a private company to a public company and have utilised our own balance sheet capital as well as managing third party capital. Encouragingly at the ten-and-a-half-year mark we have seen an increase in our investment performance metrics achieving a cumulative Return on Invested Capital (ROIC) of 162%, [including losses] and a cumulative IRR of 79% (HY 2021: 78%).'

At some point one would thus expect the share price to reflect these returns.

Regards Maddox

[greenknight1] 27/6/2022 15:09

Interesting large trade today

[adamb1978] 22/6/2022 22:31

Considering wider market conditions, LIT hasn't done badly this year. And as long as the company continues to perform, the share price will take care of itself eventually

[solonic] 17/6/2022 12:46

This could be our last chance for quite a long time to jump on the bandwagon profitably.

[bigbaggy] 17/6/2022 08:02

Both good points Adae. I am expecting this to go higher. The trading volumes have been pretty high last couple of days. I get the sense (no more than that) that something interesting is happening in the background…just a hunch but I have been adding. DYOR.