Litigation Capital Manag... Share Discussion Threads

[jackson83] 30/3/2023 15:50

60p soon





























































































































.


































.


























.























.

[jackson83] 30/3/2023 15:49

where are the RAMP CREW!!! NOW ???




RED FLAGS


































































.















































.






























another FUNKY FINANCE mess






































.
















.




































































.






















































.




























.






























.































.

























.
























.

























.





























.




























.




























.




























.






























.




































.

















.
















.



.














.




























.



















.

















.


.













































.


































.



































.



































.

































.









































.






























.
































.























.

[serapuff] 23/3/2023 13:25

ah ok anyone can DM me?

[tradertrev] 23/3/2023 12:21

Nick is very interested in litigation which means you're probably not going to get an answer to your question in print!

[serapuff] 23/3/2023 11:35

What's the story with Nick being a chancer? I'm a fairly new investor to this company, so not aware of this part of the back story - just know that Nick got fired over expenses (which obviously can't be true).

Gideon

[serapuff] 23/3/2023 11:34

On the 3.2M - it can't be clawed back in future, meaning it's fully earned.

He's just saying that if there are losses in future cases, it will be offset by wins in even later cases before performance fees on these later cases are paid

Gideon

[makinbuks] 23/3/2023 10:53

Yes, as always with these things its not black and white. It is reasonably transparent at the moment because there are so few actual case results. In future though, if you have four funds for example and multiple case results on a monthly basis this kind of thing becomes much more opaque

[maddox] 23/3/2023 10:42

Hi Makinbuks,

I can see the fairness that fees taken on a win should be off-set against cases which are subsequently lost. This approach has the benefit of more timely revenue recognition - I don't see this is an overstatement of prior profits - as the claw-back only occurs if an when a loss later occurs. Otherwise there will long lag between accrued fees being recognised - so on balance I far prefer this approach.

[makinbuks] 23/3/2023 10:38

My feeling on people are that Maloney made the decision to expand to the UK and chose a partner. He was then blown off course because he himself couldn't relocate due to COVID and the partner turned out to be a bit of a chancer. Now he's here and he's invested in a good looking new team. That must push costs up which may be what's behind your question but with Maloney now firmly in the drivers seat that growth in cases and investment in the UK can finally be realised

[robsy2] 23/3/2023 10:13

The Q& A is very detailed. It is a feature of the Investor Meet Platform that a lot of people, well me at least, had not fully appreciated.
While he did give an answer to all the questions,his answer to my question asking him what the average cost per employee was?... was that they don't keep that stat!
Anyway , I am still sat on a loss here but am fairly comfortable. I feel that the hard yards have been done and am confident that the returns should start to flow nicely over the coming years.

[makinbuks] 23/3/2023 09:46

Thanks for highlighting that I didn't appreciate that facility was there. I applaud him for commenting in detail. I can see that the A$3.2m is "earned" but still think the revenue recognition under IFRS is at least a consideration while this true up plays out. As I understand it, if future cases are lost we have to write off our costs and additionally bear a portion of the funds costs, hence our loss on that case in isolation is exaggerated or put it another way our previously declared income was inflated.

[serapuff] 23/3/2023 02:56

@Makinbuks - Patrick heard you and responded in the Q&A on whether 3.2M can be clawed back:

hxxps://www.investormeetcompany.com/investor/meeting/investor-presentation-265

Q21

- Can't be clawed back
- But true-up mechanisms where in future, losses get repaid first before future performance fees are made.

Gideon

[makinbuks] 20/3/2023 09:06

Yes I agree that is impressive. Surprised the price hasn't stepped up

[robsy2] 20/3/2023 07:27

Good news. Further validation of the value on offer here.

[spectoacc] 20/3/2023 07:10

"Litigation Capital Management Limited (AIM:LIT), a leading international alternative asset manager of disputes financing solutions, announces that on 17 March 2023 Jonathan Moulds, Chairman of the Company, purchased 1,675,000 ordinary shares in the capital of the Company ("Ordinary Shares") at a price of 71.35 pence per Ordinary Share.

In addition, on 17 March 2023 Patrick Moloney, Chief Executive Officer of the Company, purchased 157,092 ordinary shares in the capital of the Company ("Ordinary Shares") at a price of 71.00 pence per Ordinary Share.

Following the above purchases, Mr Moulds has an interest in 5,250,000 Ordinary Shares, which represents 4.40 per cent. of the issued share capital of the Company, and Mr Moloney has an interest in 10,437,100 Ordinary Shares, which represents 8.76 per cent. of the issued share capital of the Company."

[serapuff] 15/3/2023 11:46

@Makinbuks - I went to listen through the part again (43 mins).

He said

- The performance fee is paid on a case by case basis, meaning independent of performance future cases (this is also my understanding of American waterfall).
- I think what he means for that specific case, it may still be possible to have a square up/claw back for whatever reason, and if it happens it will happen quickly, and it will be clawed back from the next case settlement.

Why it could have a claw back/square up, I'm not sure, but conceivably something happened to change the settlement amount, or for some reason or other the counterparty doesn't pay up (although I imagine they only get their performance fee after the counterparty pays up)

Gideon

[makinbuks] 15/3/2023 11:38

What did you make of Maloney' answer about the A$3.2m performance fee being repayable depending on future results in Fund 1? I thought he was evasive but to be fair again IFRS is quite strong on this now

[serapuff] 15/3/2023 11:24

@makinbuks
- I don't read too much into the adjusted numbers or the income before/after resolutions as I am more concerned of the underlying performance of the current investments (delayed)

However,
- Fund administration expense - in the footnote it said that on pg 5 of the interim report, it says that it is wholly attributable to third party interests. Sounds like they can claw back from investors as the fund produces return. Similarly the balance sheet has a -5,231 which reduces the liabilities due to third party interests - sounds like what the third party "owes" them for setting up the fund

- I'm not sure about share based payments and litigation fees - those seem to occur every year so I just include it as normal opex
- the Opex has been quite stable every half so I just use that number as a ballpark. They are very lean.

- Key for me is whether management can demonstrate what they have been saying to the market last few results (mature portfolio which will realize at historical MOIC). That's why the response to my question on why the returns on Australian class action was low was important. It was good for them to clarify that this is the exception rather then the norm.

- At least they have demonstrated the economics of the fund structure with the KPMG settlement, which is quite important. Looking at Omni bridgeway, one reason they are doing so badly is because their Fund 1 which is realizing right now has seen most of the economics go towards the external investor, and they are quickly writing down their share of intrinsic value of the portfolio. Burford has also came out to say that they are shifting more of the investments to their own balance sheet which may indicate the fund model is not working for them.

Gideon

[makinbuks] 15/3/2023 10:20

Some good analysis and comment here , thanks

One additional topic, "Adjusted loss for the period A$5.5m reflecting conservative revenue recognition. Post balance sheet resolutions would have increased LCM only performance to an adjusted operating profit of A$6.3m"

But the statutory loss was A$10.9m after interest and one offs. Those one offs were additional OPEX of A$1.7m detailed in note 5. Why would "Fund Administration Expenses A$1m" and "Share based payments A$0,3m" not be considered regular expenses? I presume "Litigation fees A$0.2m" relates to the departed UK head which could be non recurring or could be something that is yet to be resolved - no comment from Maloney and my question went unanswered

Note also that further OPEX in the form of fund set up fees are capitalised and written down over the lifetime of the fund. This is IFRS compliant but OPEX is not as simple as twice the number quoted for this HY at A$7m

[serapuff] 14/3/2023 15:16

Hi, what I took from the presentation/Q&A - a lot of the questions I pre-submitted were answered-

- H1 commitments (100M) is the highest ever, and the trend is expected to continue given the new hires and the macroeconomic environment. What I was surprised at (which I have asked a question on) is the dropping applications. I suspect this is due to Nick/Matthew leaving although management won't say so. But with the recent new hires, I am sure the trend will reverse - the resumes of the recent hires are quite impressive.

- What I got confused though was that their # of applications was dropping, but they have record commitments, so not sure if underwriting standards are falling (although they qualified more complex cases)

- They are very cost efficient compared to Burford/Omni (OPEX is c.15M + 7 M interest), and comparing it with the AUM of Burford/Omni & new commitments they are also more efficient

- The rising returns when cases are delayed don't apply to Australian class actions. That's why the recent return on Australia class action was quite poor. I asked what % of investments are Australia class actions (although haven't got a reply), but if I have to guess I'll say around 15-20% of their portfolio

- I think one key thing to observe is that their current contract assets is now at 31M (vs direct deployment of 120M) - so they are expecting around 25% of their cases to settle in the next one year - including 8M from australia class action. So on the balance sheet investments, for the next one year we may see around another 23M settle, which maybe~60-70M of revenue on the balance sheet investments side (just gut feel) on top of the 14M for the class action.

They don't show the current assets for the Funds, so we don't know how much revenue will come from there, but probably quite significant since they have quite a good performance fee of 30-35%.

So CY2023 should be a good year if things go according to plan.

- They had an arbitration loss. Didn't like that.
- They didn't seem concerned about key man risk (I asked that as I felt it was a significant risk facing the company)

- they mentioned they were looking at 0.5B (I think USD although not mentioned) fund 3 in 12-18 months, that's quite exciting!

- management remain confident that their legacy direct balance sheet investments will have returns more similar to their historical returns (and not so much like the class action). They don't seem concerned about the delays due to COVID.

- the macroeconomic conditions remain very conducive for new business/commitments
-> the banking crisis will likely lead to more lawsuits

- so overall, possibly good CY2023 settlements, very strong commitments, a bit concerned over UW standards with low applications but record high applications, strong hires/team, poor realizations in last 6 months resulting in poor financial results, continued operational efficiency, need to see more evidence of case settlements to justify management's faith that there's nothing to be worried about COVID delay (although we are starting to see some).

Gideon

[daz] 14/3/2023 14:19

Having checked the slide, there is AUD$65m committed to cases outstanding for 49 months or more, which is well above the 36 - 42 months expected.
I wish the slide would explicitly state the number of cases but this seems to be covered by the following slide, which lists 10 including one write-off and at an average of $6.5m per case, that seems to be about right.

The slide list 6 cases either awaiting judgement or with final hearings scheduled, so I may be worrying unduly,

[maddox] 14/3/2023 14:03

There are only three potential outcomes to a case, settle, win or lose in court - and every case will conclude - the huge uncertainty is over what timeframe. This will cause the results to vary quite dramatically from period to period, especially as the case-size increases.

[warno01] 14/3/2023 13:27

The way I read it is that whilst case resolution times have lengthened, like all litigaation funders, increased duration also is covered by increased return built into their agreements often due to interest rates applied on judgements.

Whilst the last 12 months is challenging, the post interim report results are promising with now a total of US$25m booked in yearly revenue.

2023 has a lot of potential now. 146A$m of deployments now at 25 months and beyond, 110m at 37 months+ on the balance sheet funding basis. 124m at 25 months plus on the fund basis. 80% IRR on those sums becomes very healthy - call it A$200m likely to be decided in the next 18 months. Only upside for me.