Litigation Capital Manag... Share Discussion Threads

[gallamar] 05/12/2024 08:12

I deal in facts.

We have an insurance policy!
Rather than panic people I just contacted the company.

Generally the court will order the losing side to pay the winning side’s costs however these orders have not yet been made. LCM also has a policy of adverse costs insurance so the insurer will need to pay these costs out when they are ordered. If we appeal we will ask that any costs order wait until the determination of that appeal as if an appeal is successful any costs order from the initial court will be overturned.

[gallamar] 05/12/2024 08:05

Wow. What a load of scaremongering.

I knew the case was large for years and it was held at cost. This was a 1bn usd case and I raised issue on multiple conference calls.

A legacy case went bad just like greenex made 10x.

If you want to write off a company based on 1 bad event, ignoring all the good events so be it.

[paradigmaus] 05/12/2024 01:31

Do you have a link to the video?

[bigbaggy] 05/12/2024 01:07

20% of invested cash blown up on one case. And that is just their own costs. What about the LCM liability for the winner's costs? They probably have some level of ATE insurance cover but (1) insurance for, say, A$15m adverse costs is hard to come by and very expensive to maintain. (2) even if they have it on paper - will it pay out ? As others have stated above, the case deteriorated badly, so were the insurers properly informed. Did LCM step into their shoes ? No idea. Pure conjecture but the RNS on this is very thin. Who knows.

This is horribly tough territory now. The other side's lawyers and the insurers lawyers will be ravenous. Very sad to see. I think Patrick the LCM CEO has fought very gamely. Wonder whether the CFO leaving a few months ago, just before results were issued, was possibly connected to this ? Again, who knows. Pure conjecture.

Much more fundamentally: the investment thesis on this stock seemed to be that it was a nailed on constantly growing cash multiplier. Hindsight, yes, but that was always complete nonsense peddled by a buffoon in a wig and sunglasses. He ramped the shares and legged it. This is litigation. Of course they were always going to get a bloody nose at some stage. This case is a massacre though. And so soon after the Katy Perry loss. No RNS on that one.

So valuing this by moronically assuming perfect win record and perfect execution is and always was pure garbage.

LCM is and always was very, very high risk because they have and always have had a very small size portfolio of very large bets. And this is one of their very largest cases and furthermore held at a 20% Fair Value premium to cash cost. TomT is of course 100% correct in picking Maddox up (Maddox used to be a high quality poster) when Maddox stated the judgment was "perverse". Pure nonsense Maddox. You need to take your loss like an adult as well. I thought you seemed better than that. No one is going to appeal this. It is completely disingenuous of the company to suggest otherwise. It turned into a complete pig but going back through the river of blood was never going to be an easy decision. BUT you do not put more good money from the bank and shareholders after bad. Take it on the chin. It will be bloody awful for the numbers and the equity story but you have to live to fight another day. The Fund model must be the way forward, if there is one. But how will fund investors perceive this outcome, is the obvious question...and equally obvious answer...Query also the very recently announced new bankers. Gordon Bennett, they must be spitting feathers...

The other listed funders that I am aware of: BUR, OMNI and MANO all have one similar feature that LCM never had. They have LOADS of cases. Yes, of course a total YPF write down for BUR would be horrible but even then...it has LOADS of other cases. OMNI looks pretty well balanced. MANO is very, very granular and cookie cutter UK insolvency small/medium cases.

Sad. But this was always an incredibly brave business model. As soon as I saw the video of Patrick Maloney the LCM CEO actually WITH the buffoon in the wig and sunnies, this looked like a total sh*t show waiting to happen.

[gallamar] 04/12/2024 20:32

Greenex great win
This annoying loss.

1. Cashflow will be fine
2. Greenex pays for fv loss
3. Concentrated position has gone.

Not the best day for the firm and I think lcm should really address this directly in next call and not fluff over it.

[tomtrudgian] 04/12/2024 13:11

Agreed Maddox, although I wonder why you early today called the decision perverse. Shareholders and you may now have had time to study the long judgement, which I2b has kindly referenced for us. It is pretty damning.

These class actions (frankly, crowd funding) can sometimes take on a momentum of their own, particularly if the lawyers gain clients with fee offers. Common in Australia, rare elsewhere.

The original LCM case was certainly arguable. Over time it grew to be impossible for either parties, and there were so many, to give in.

Fess up LCM. Do not appeal and shareholders may understand. It is a huge hit to LCM, but USA might not have been a good idea anyway.

[gallamar] 04/12/2024 12:50

Nc

Agree with your comments. I actually liked the situation as the win was not priced In.

I would not be surprised if we appealed. What is an extra 10pct say and you might get lucky.

Also with time it gets forgotten and other wins come in to smooth it out

[nchanning] 04/12/2024 11:59

Suprisingly resilient since presumably LIT could have won multiples of 25m Aussie dollars today . The both sides were going to appeal maybe suggests there was some new point of law made that could be overturned by a higher court ?

[maddox] 04/12/2024 11:22

This case isn't over yet......

However, it does I think prove the case for the Third Party Funding model that they have adopted. It allows LIT to spread the risk over a wider diversity of cases - with less invested in each case but still competing at the higher-tier case values.

[gallamar] 04/12/2024 10:07

The case was held at historic.

IMHO it is disappointing as it was a big bet on a huge case and was a hidden call option.

Greenex award more than compensates but a win here would have taken their capital to a new level

[tradertrev] 04/12/2024 09:01

Win some you lose some

[mighunter] 04/12/2024 08:54

The expected gain was not even close to being factored in whatsoever

[riskvsreward] 04/12/2024 08:25

It is not just the loss of capital investment. It is also expected gain from a win built into the share price.

[maddox] 04/12/2024 07:37

Unfortunately, you are occasionally going to get perverse judgements - I expect we'll see this go to appeal. One court's 'legitimate profit maximisation' may well be 'market price manipulation' against the interests of consumers in the opinion of another.

Mr Market ain't going to like it - A$25m is c. 10% of market capital - so on the face of it a bad loss.

[robsy2] 04/12/2024 07:20

Patrick Moloney, CEO of LCM commented: "We will carefully review the Federal Court's decision and, with the legal team, will assess the prospects of a successful appeal from the judgment. Our expectation has always been that an appeal in this case was likely, regardless of the initial outcome. We remain confident in the strength of the underlying claim."

[l2b] 04/12/2024 07:06

Queensland Energy case dismissed - back to back losses.
Justice Derrington said Stanwell and CS Energy did not take advantage of their market power. She found the power companies' conduct was legitimate "profit maximisation behaviour".
....Government bodies working for the people lol!

Interesting comment - "The applicant has indicated that it may seek to appeal this decision."

Decision:-
www.comcourts.gov.au/file/Federal/P/QUD19/2021/3907460/event/32050499/document/2402023

www.abc.net.au/news/2024-12-04/classs-action-electricity-power-prices-stanwell-cs-energy-court/104682764

[warno01] 04/12/2024 02:58

Queensland energy class action dismissed by judge overnight. Massive win porential gone. Interesting to see if there is any share price impact

[mtioc] 02/12/2024 16:37

The new facility is certainly an improvement and appears to be a more conventional corporate facility (e.g. no profit participation). The facility is important for the obvious cost of capital benefits, but it may also allow LCM to mitigate any adverse realisation periods.

The reduced cost of capital is described above. Undrawn debt will usually have a commitment fee 50% of margin or c. 2.75% but with no associated cost of funds. When drawn, the interest is the relevant interbank rate by currency (probably c. 4% blended down from 5% a year or so ago) and the margin 5.25% vs 8%. So, cost of debt c. 9.25% vs 13% historically.

While leverage is not a major driver of returns, if LCM wishes to maintain its 25% Balance Sheet share per investment, I believe the facility also provides LCM with insurance against an adverse period of realisations versus commitments/investments. The facility appears to have the ability to grow with the asset base. I suspect that additional facilities are a commercial intent rather than a firm commitment (that would cost LCM).

[robsy2] 02/12/2024 15:20

Seems to be working NC. This has been ticking up steadily since the October lows.might make an all time high this yesr.

[nchanning] 02/12/2024 09:45

Much more significant moment than market is giving credit for , cost of capital massively reduced . If you're doing a DCF and debt is priced at 13% you need to give an even higher cost of equity . Taking 300 basis points off your debt is massive and moves LIT from ultra-risky equity into moderately risky equity . Valuation should respond accordingly

[nchanning] 02/12/2024 07:45

Excellent news on the credit facility , a big vote of confidence from the lenders . Significant benefit to the bottom line from the reduced rate ~ 2 million USD and nice flexibility to borrow more if needed

[boozey] 30/11/2024 17:45

L2B, I echo tour's comment. Always appreciate your posts.

[tourmaline44] 29/11/2024 23:00

Thanks for your posts L2B. Very much appreciated. Are you Australian?

[l2b] 29/11/2024 21:51

Queensland Energy/Electricity class action JUDGMENT scheduled for Wed 4-Dec-2024 at 10:00am (Qld).
Case concluded in August so a quick turnaround for a big case.

For the newbies, this is a big one - A$1bn class action (funded by LCM) brought against Queensland’s two largest electricity generators (Stanwell & CS Energy) alleging they gamed the electricity pricing system and artificially inflated consumers' electricity bills.
>40,000 customers / SMEs registered.