LON:BUR | Burford Capital (BUR) - Prospects For Its Debut On The NYSE?

1st Oct '20 by Maddox

47 comments 2283 reads

Burford Capital (LON:BUR) has today cleared the final hurdle and will be duel-listing on the New York Stock Exchange (NYSE) on the 19 October; maintaining its AIM quote. No new shares will be issued in NY but Financial Institutions (FIs) can elect to trade their shares on the NYSE - this will provide immediate liquidity on the NYSE.

The enormous disparity in the valuation that US investors appear to place on US firms, most notably the FANGs, but also more widely is clear to see. A good example is Palantir (PLTR) floated in NY yesterday. It has c. $1bn revenue and never declared a profit - a strong debut - closed valued at $21bn! Nothing particularly unique as a business, it specialises in the data analysis of large databases and data streams for Governments and private sector firms. It doesn't even own the data it analyses.

UK shareholders will often say "just imagine what XYZ plc would be worth if it was listed in the US?". Well now we get a good opportunity to see the truth of the matter.

Burford Capital (LON:BUR) is cheap on a p/e 5.6, profitable and North America is their largest market c.42% by capital commitments and the US has perhaps more appreciation of litigation as a business tool. So a US listing does seem appropriate. However, the decision to list in the US was more a response to the Muddy Waters short attack and criticism of Burford's corporate governance and fair value accounting. Whilst it's not worth repeating the ins and outs of MW's short case again I think it's fair to say that very many shareholders believed it to a sufficient extent that the share price has struggled to recover. Burford responded to the MW critique in detail, undertook to fix the points that they felt had substance and this brings us to the eve of their dual listing on the NYSE.

So, it's going to be fascinating to see whether a US listing delivers the re-rating that is widely speculated? Will US investors' greater risk appetite be salivating at the high IRR and ROIC that Burford generates?

What we have with BUR is a lottery ticket - it could go bang ...or it could go fut! I cannot judge, but I have bought lots of tickets.

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Rusty2

20th Oct '20

Well it was the first day of trading, so many won't have known and of course it may well not be that way around.

Burford Capital (LON:BUR) is about 5% below it's 52 week high, I think that will be key in the next week or so, if it can break through that it may momentum to carry on. I'm a long term holder of Burford Capital (LON:BUR), I should ahve sold more around £20, c'est la vie.

Nick Hewett

Seems to be heading up again today now the US markets have opened

Fegger

plus potential other related claims: from article: Decisions are expected next year in Germany, Spain and the Netherlands, while the U.K.’s Competition Appeal Tribunal -- which is holding hearings in December on whether to establish two class-action cases for about $7 billion in claims each -- could issue its first ruling in the first half of 2021, Ortiz said in a note.

tripuram

21st Oct '20

don't think listing has helped in anyway unless Burford Capital (LON:BUR) does more marketing in US.. Hope it works out in the long term.. What do you say @Maddox?

Maddox

22nd Oct '20

Hi tripuram,

Well the graph would say otherwise - and the more gradual rise was in the knowledge of the listing. But your're correct we need more US buyers to absorb the disenchanted UK liquidity. BUR have recruited a US Investor Relations Team, the shares look cheap, the results were good.... so just need to get the story out.

It's obviously difficult to get into the minds of investors and their underlying rationale for their buy or sell decisions - Chartists make assumptions on that basis but unless it's a large buyer or seller that makes a statement - you never really know.

willhampson

I'm curious by the sudden jump in projected dividend yield on the stockreport (showing a projected 48c div for 2021). Does anyone know if that is a mistake, or from an updated broker report? I'm assuming the former as it seems unlikely that the dividend would be increased so much (but I wouldn't complain obviously). Best, Will

Momoko Miyamoto

6th Dec '20

The accounting practices of Burford Capital (LON:BUR) are questionable and the low P/E is misleading. If and when they list on NYSE, I imagine they will attract as much short interest as on the long.

They have been listed on the NYSE for about 6 weeks now.

Westway001

Oh dear MM, your comment is very ill-informed.

JJB1

19th Jan '21

Burford Capital (LON:BUR) Does anyone know if a trading update is due? I cannot find any information on up and coming results/update. I would like to add to my long term position but am concerned at the recent weakness. I understand cases may have slowed due to Covid/process issues but the share price sell off signals more than that...or maybe not!

abtan

I believe they issued an RNS on this a couple of days ago

Yes, 17th February is scheduled prelims.

https://www.stockopedia.com/share-prices/burford-capital-LON:BUR/news/burford-capital-ltd-notice-of-fy20-update-amp-preliminary-results-urn:newsml:reuters.com:20210114:nRSN6142La/

Many thanks

Luthrin

2nd Apr '21

Positive articles regarding Burford in the press have been a rarity over the past eighteen months, but perhaps the tide is turning if the following piece in The Times today is anything to go by:

Steinhoff settlement is big win for Burford Capital

The report ascribes yesterday's 10% rise in BUR's share price to news that Burford is likely to be a part beneficiary of a large settlement proposal by Steinhoff, the South African retail holding company that was embroiled in an accounting scandal back in 2017. The journo (Tom Howard) points out that Burford doesn't discuss individual cases and it's unclear how much of the $1.1 billion settlement will end up in BUR's coffers, but that analysts at Jeffries "expect the sum to be significantly higher than the money Burford invested".

Jeffries analyst Julian Roberts is quoted as saying that a total of $1.1m had been deployed on the Steinhoff claim by the end of 2020 and that deployments are likely to have continued. Here I think Roberts is mistaken and that he's incorrectly identified ID 190275 as the Steinhoff case from BUR's published investment data. Yes, that's the only possible qualifier from Africa, but that case is an arbitration in the Materials industry. To me it seems far more likely that the case in question is ID 181214, which is a securities matter in the Consumer Durables & Apparel industry (matching Steinhoff's industry classification) based in Europe (Steinhoff is dual listed in Germany and South Africa, and it was the German authorities that first began investigating accounting irregularities at the company).

At 31 Dec 2020, $0.5m had been deployed towards ID 181214, out of a $2.4m commitment. I'm therefore somewhat sceptical that BUR's price rise yesterday was principally due to the Steinhoff news.

Below is a table of BUR's balance sheet investments in single cases at 31 Dec 2020, sorted by size of deployment. ID 191299 at the top of the list is intriguing. For BUR to deploy such a significant sum ($55m) in a single case so quickly suggests high conviction in the outcome. Although I have no direct evidence, I suspect that this investment relates to claims against US meat producers who have been accused of operating a price fixing cartel since at least 2009. Burford has commented on these anititrust claims in several of its Insights articles, and already this year we have seen a number of the defendant companies agreeing settlements.

26th Apr '21

19 March 2020 marked the six month anniversary of Burford Capital (LON:BUR) on the NYSE and the shares were languishing at 610.5p having debuted at c. 725p. So, it seemed that a US listing was not the 'simple' route to a stellar valuation that we might have hoped for Burford.

And yet, one month on and the share price is looking far more perky (860p as I post). It's difficult to attribute an explanation . The FY 2020 results on the 24 March met with a fairly mixed response . The US$ debt issue in the US '144A' Institutional Debt Market was perhaps the more likely trigger. It will have caused a good number of US Financial Institutions to run their eyes over Burford, perhaps for the first time.

£BUR looked to raise $350m : "we don't need this capital today, but we're being opportunistic and pursuing an attractive market condition" "this also reflects a shift, consistent with our shift to the New York Stock Exchange, dual listing last year. The US institutional debt market is the deepest in the world and so putting an inaugural issue into that market and becoming an issuer there is something that has been a long-term goal of ours, ..... with this inaugural issue out of the way that we'll have access, ready access, to that market and to be able to drive down our funding costs over time."
Christopher Bogart, Chief Executive Officer, Analysts Briefing 21 March 2021.

The debt issue met with strong demand:

“it was exceedingly well received by investors the offering was significantly oversubscribed. We were able both to increase its size and also the drive down the coupon, the effective interest rate on that debt and so that was really a show of strength in the market.”
Christopher Bogart, Chief Executive Officer, Shares Magazine presentation 20 April 2021.

The initial offer was $350m of debt and this was increased to $400m due to demand. The coupon rate is 6.25% for redemption in 2028. This is a substantially sized initial debt offering, the market demand and pricing, indicate that this is an attractive available source of US$ capital for £BUR that matches its assets – thus mitigating financing and FX risks.

So, was this the spark to ignite US Institutional interest? There was of course other possible explanations, and also it's still early days - we might find Burford Capital (LON:BUR) back in its sideways trading channel.

Laughton

Maddox - given the yield on their existing debt do you not find it a bit concerning that they had to offer such a high yield to get this American debt away?

Disc. holder of Burford Capital (LON:BUR) and their 2024 bonds

The US volume also seems to have picked up a little. Perhaps we are also seeing less selling from pre bear raid days. Both positive signs if it holds!!

Burford Capital (LON:BUR) (I hold)

Hi Laughton

As far as I can see Burford's current debt pays between 5% and 6.5%.

https://www.hl.co.uk/shares/sh...

The 6.25% for the new offering doesn't seem out of sync with previous raises.

Or am I missing something?

Agreed abtan it's bang in-line with its current debt profile. As an inaugural issue and not exactly a trivial amount at $400m it seems a reasonably good coupon rate. Burford's assets are not tangible so I think you would expect to pay a premium. So absolutely no concern Laughton.

Gromley

Purely as a personal aside, but I have a reminder of how I still have not fully cured myself of the tendency to buy too soon.

Today's close sees me now break-even give or take 0.1%) on my original purchase about 18 months ago.

On the other hand I am up around 3% on my purchase less than a week ago (despite missing out on around on nearly 5% because other matters had my attention one morning last week!).

Maybe I am counting my chickens, but it does seem that compared against August 2019 the momentum is more on my side now and there are more ducks in a row; both in terms of the results / outlook and the bond issue.

Burford Capital (BUR) - prospects for its debut on the NYSE?

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Maddox

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