(decided to copy my smcl comment into a place where can be found for Burford chat)
Burford Capital (LON:BUR) is a much loved and despised stock.
Following the Muddy Waters short raid I re-engaged a half position in the high 700s following the announcement of corporate governance changes (i had owned prior to MW and then traded very big around the volatility buying 2 for every 1 share I had in the 500s and then selling all in the high 800s in days after...not my normal approach but I felt the MW thing provided a chance to trade the emotions and allowed me to put an effective loss floor in at approx 1350p).
So I believe there is value in BUR both pre and post MW.
On today's update for H2 19 I decided to sell a bit ahead of the 11.30am call at 650p level. Why sell?
1) This has turned into an issue of whether BUR has the right capital structure. I could always see this and pointed it out as the weakness...however, its reflexive and if its believed in the capital structure is good and if its not then its bad....its somewhat like a bank...a money printing machine when confident in it but potentially insolvent if not due to asset-liability mismatch.
Subsequently, on the call with mgt most of the questions from brokers and institutions focused on this underlying capital structure issue. What's the BUR response...
2) CEO says as there's such a big opportunity ahead of them it would be 'imprudent' to not raise the funds to take the market share as otherwise other people would. This was directly in response to whether they would buy back shares as muted in peak throes of MWgate). IMO he did not like being asked this question at all.
3) Given the amount of capital they have deployed into cases in last few years and their claim that the duration of case resolution is sub 2 years the slowdown in realised cash and earnings write up gains in H2 19 is close to a financial heart attack. It is at least partially true that timing of returns is an act of God (well the courts and legal process), but...
4) I can't help speculate…
As the article in journal of litigation finance highlights, it isn't that FV is necessarily a bad, it is how it is applied.
Burford do not AFAIK provide cash accounting comparatives. Nor a transparent full disclosure.
Per above, it really is terribly bad fortune for them to see the random outcome from cases generate a decade of uninterupted growth and then a profits warning in the first reporting period after the MW dossier when they were under increased scrutiny.
