Litigation Capital Manag... Share Discussion Threads

[nchanning] 20/7/2023 10:17

They haven't made it clear what the threshold for RNSing case wins is , but if they say invested 5m AUD in a case and got a 13m AUD return it seems like they wouldn't mention it and we would only see it appear in the results

[citywolf1] 20/7/2023 09:33

Nice rise again with the announcment of the Indiana case surely helping. Confirmed as being a Fund 1 investment. One does have to wonder what is going on with all the direct cases; at HY we had $65m of deployed capital over 4 years old and all in direct cases. Getting some of those over the line would have a big impact on balance sheet and most will surely be great returns given the rising multiple over time dynamic. Hopefully this year is the year!

[nchanning] 20/7/2023 08:31

Seems pretty standard for sovereigns to make a bit of a fuss , try a pointless appeal then pay . Not only are there always ways to seize assets , it's not good for business to be flouting international law and refusing to pay judgements. Just a bit of political posturing required first , for which LIT is compensated for by a higher payout

[maddox] 20/7/2023 08:09

Another great case win today - let's see whether the RNS of a positive case outcome lifts the share price?

[74tom] 20/7/2023 07:26

Nice to see clarification from the company & the positives of the new fair value policy being highlighted;

“The investment however is no longer attended with liability and quantum risk as that has been decided.“

In such situations it clearly makes sense to recognise a fair value mark up pending final settlement. How much that is remains to be seen.

Ps. L2B, the silliest quote I’ve seen from on here this week was “IMO looks like mgt caved to Short Termers hoping for a couple of bags.“

If that doesn’t scream arrogance then I don’t know what does.

[l2b] 20/7/2023 07:08

IDA gives Tanzania until 17-Aug to pay up
cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02688497-6A1159154?access_token=83ff96335c2d45a094df02a206a39ff4

Then expectations is we move to airplane seizures
simpleflying.com/air-tanzania-aircraft-seizure-100m-mining-compensation-claim/?newsletter_popup=1

It's worked before against Tanzanian government
www.thecitizen.co.tz/tanzania/news/national/air-tanzania-plane-seized-in-the-netherlands-released-returns-home-4297688

Claims that Tanzania seeking to annul - good luck with that fellas - you lost and were ordered to pay the full whack.
www.thecitizen.co.tz/tanzania/news/national/tanzania-to-fight-order-to-pay-foreign-investor-109-5-million-4308396

P.S. Thanks for the technical correction Maddox - I used MTM over FV outta habit/convenience but FV is more appropriate - I trust no confusion caused to others as it's understood there's no active market
P.P.S. It amazes me that people think forecasting is reliable or even scientific - as Galbraith said 'There are two kinds of forecasters: those who don't know, and those who don't know they don't know.'

Edit - RNS out - 3PTY claim & positive about enforcement

[robsy2] 19/7/2023 21:00

Whatever. It seems to be working.

[warno01] 19/7/2023 15:22

If the SEC are supporting fair value accounting methodology for the biggest player in the industry (BUR) then all other players will need to follow inc LIT. It's a good move. Ultimately you still mark up or down based on milestones and decisions but it's about having a standard on which you can consistently judge progress by case value.

[74tom] 19/7/2023 15:22

I would think everyone reading these boards is aware of what happened with Muddy Waters. Fast forward 4 years and the SEC want the largest industry player to comply with accounting rules via a system which actually increases BUR’s fair value estimates. That provides a heap load more credibility to the methodology & framework.

I can tell you one thing, it’s a heck of a lot more logical than some of the accounting related to property & investment trusts like HEIT.

[nchanning] 19/7/2023 15:08

MANO have a cool system for getting book value up . As soon as they sign a case they write up its value because obviously they wouldn't have bought the case unless it was worth more than they paid .

[maddox] 19/7/2023 15:06

Ok - couldn't stay shtum. It was, as L2B observed above ( Fair Value Accounting that was the basis for Muddy Waters' short attack on BUR: 'management cooking the books' - 'over-valuing cases' - 'running out of cash', plus some added colour.

Then there was a carbon copy short attack on MANO - that also use fair value accounting.

[maddox] 19/7/2023 14:34

OK last comment on this. My key point is that Litigation Finance is too complicated for most investors - perhaps not for anoraks like us - delving into the detail - actually reading an Annual Report etc. And yet; BUR's last results rns I found very challenging to interpret. The highlights all looked pretty spectacular - three digit percentage increases - loads of positives and yet it failed to impress Mr Market.

My belief, the presentation was far too complicated. Most investor don't have an hour to spare to analyse a set of results. By the way - I don't see it as an easy task - presenting a few key figures and metrics in a way that clearly reflects the performance - is difficult. You have different audiences to address for one thing.

Adopting 'fair-value' is a step in the wrong direction for LIT - more complication - no value-add.

[74tom] 19/7/2023 14:33

Maddox, all I can say is that at $19 a share your maths would have BUR trading on a price to book of 9x, excluding any further FV gains related to YPF. I can understand that opinion given their industry standing and the potential to compound the $1.5b of invested capital several times over in the next 10 years, however I can't square it with where LIT stands & your desire for them to remain on a cost accounting framework that is currently seeing them valued at 1.6x book (assuming FY23 results show equity of ~£65m).

Good to see the market is waking up to the fact that even at 2.5x book value LIT would be trading at £1.36, the margin of safety is still very substantial at current levels.

Ps. by my calculations the other UK listed legal specialist, Manolete, is trading at ~9x book value / 2.7x FV. Would they be better off using accounting?

[maddox] 19/7/2023 13:42

Now if I was into charting - I'd probably point out a highly significant cup and handle formation - with a re-test and 'moment of truth'.

[maddox] 19/7/2023 13:40

Yes, human beings seem to have a binary brain - it has to be either/or - whereas I'm polyamorous - why not have both?!? It's also clearly beneficial to compare and contrast their varying attractions, diversifies risk and aids understanding.

[someuwin] 19/7/2023 13:38

Stock is getting tight. Can get a buy quote for £5k. But not £6k

[maddox] 19/7/2023 11:36

My maths put a value on BUR as at 31 Dec 22 at c. $19 per share - excluding YPF cases. This is taking account of the BUR's internal modelling, accrued performance fees and B/S cash then deducting debt and fair-value already taken into the P/L. BUR use a probabalistic model to estimate the terminal value all their in-flight cases - this is reported separately rather than but put through the books - thankfully! But, very useful indeed to understand the hidden value - not reflected in the B/S.

We'll have to agree to disagree - but as this is LIT's thread probably annoying for others for too much in-depth discussion on BUR - happy to take the discussion over to BUR thread.

[74tom] 19/7/2023 10:42

Maddox, I strongly disagree with your view & the financial statements of BUR back up why.

On p42 of their Q1 quarterly they break down the split between deployed costs & unrealised gains, both on a consolidated basis & BUR only basis;



Total Burford Capital Limited equity / book value at 31/03/23 was $1.992b. Of this $1.395b was from unrealised gains ($959m YPF, $435m everything else). If they switched to cost accounting then Burford only equity would plunge to $597m / £461m ($556m / £430m on a consolidated basis).

So their current market cap values of £2.08b values them at ~4.5x book value. Further, the balance sheet would look incredibly fragile with $1.26b of bond related debt looming over everything else. I do not think there is a chance they would trade where they do using a cost accounting framework.

Also, the deployed cost of none YPF cases at 31/03 was $1.5b which is ~£5.30 per share, so I've no idea where you are getting $19 from. I know this is accurate because had they lost YPF then the remainder of their cases still underpinned their share price pre the March 31st verdict, which made the risk reward back then remarkably good.

Pre yesterday's update, LIT traded at 2.1x it's 31/12 shareholder equity of A$85.5m / £45m. So even if it traded on the 4.5x BUR rating which you believe is way below true value, the market cap would sit at £180m / £1.51. And that is of course ignoring the record performance in H2. By my estimates the full year results will show a growth in shareholder equity to ~A$125m / £65m, at the same 4.5x BUR ratio this would see a market cap of £292m / £2.45.

In reality I suspect LIT will re-rate to somewhere in the middle of their current lowly rating of 2.1x and the 4.5x of BUR, which would be ~£1.80.

Cost accounting may be prudent and simple on the face of it, but on it's own it over emphasises debt & under emphasises cases that have been won or are in the process of finalising the quantum of an award & which undoubtedly have a monetary value which could be realised via a third party sale if necessary.

Besides, BUR do give the best of both worlds by disclosing the deployed cost & the incremental unrealised FV gain. Should LIT do the same then not much will change from present, except that investors will be able to value them against BUR & other peers on a level playing field.

[maddox] 18/7/2023 22:20

BUR is my largest holding and I'm not being critical - their performance is excellent - and the excellence goes well beyond the YPF case. However, their share price is also way below where it should be. The YPF case's estimated worth is between $15 and $29 per share - and as at 31 Dec 2022 the other in-flight cases worth c. $19 per share. So, between £26 and £37 per share.

IMHO fair-value accounting (which isn't Mark-to-Market as these are mostly unique not traded assets - there isn't a referenceable market) is more the problem - not the solution.

We need simplicity, transparency and clarity of presentation - the complexity just means most investors put it in the too difficult bin. I think BUR should be copying LIT's existing approach rather than the other way around.

[74tom] 18/7/2023 22:10

The IDA arbitration award is not completely water tight at this point in time. See articles 50-52 of this doc;


That’s why there is no RNS. Tanzania appear cooked, but there is no way LIT can recognise the cash yet.

I agree that it makes sense to value initial investments at cost, however when you start to get involved in large international arbitration cases, completion claims & class actions then refusing to mark things up post trial milestones but pre cash receipt gets a bit silly. I.e. Burford’s carried cost for Peterson is ~$50m, however they have recognised ~$700m of FV gains. It’s an extreme example but I’m not sure how they could exclude any FV uplift and consider their accounts a fair representation of their financial position? If they had a $5b contingent liability they would 100% have to recognise a portion of it via a provision of some description.

A relevant and forthcoming example for LIT will be the completion trial against Govia Thameslink. That is provisionally scheduled to be a two stage trial; part 1 establishing whether the defendant is guilty and part 2 deciding the quantum of the award. If part 1 is won then I absolutely think it should have an impact on LIT’s P&L. Particularly as they are often reimbursed on a MOIC basis, so the exact quantum of the award isn’t critical.

Bottom line, I think you need a long track record of consistent returns & a very high success rate to qualify for FV accounting. It would make zero sense for a new entity to attempt it. Cash is of course king, nobody is arguing with that. I just don’t think it makes sense to take a black & white view on a business with LIT’s metrics.

Based on past experience here I know there is next to no chance of a consensus view amongst PI’s, it’s as marmite an issue as you can get!

[makinbuks] 18/7/2023 19:15

Doesn't look like too many buys though?? I assume red is sell