Small Cap Value Report (14 Mar 2017) - GYM, BLTG, BUR, FCCN

From Legal Week today:

"Shepherd & Wedderburn has become the first UK law firm to secure a portfolio financing arrangement with litigation funder Burford Capital.
The Scottish law firm is set to receive an eight-figure sum from Burford Capital, which it can use to offer alternative fee arrangements to clients as well as to grow its reach in commercial litigation and arbitration.
The deal marks the first time a top 100 UK law firm has signed a portfolio financing arrangement of this kind, though US firms have taken up similar deals including some practising in the UK."

http://www.legalweek.com/sites/legalweek/2017/07/31/shepherd-and-wedderburn-seals-multi-million-financing-from-burford-capital-in-uk-first/?slreturn=20170631081505

I joined the Burford Capital (LON:BUR) earnings call earlier. It was all very positive in my opinion. The slides are on their website:
http://www.burfordcapital.com/wp-content/uploads/2017/07/Investor-Presentation-2017-Interim-Results-FINAL.pdf

"A replay facility will be available until Thursday 10 August 2017 by dialing +44 (0) 20 8196 1998 / +1 866 583 1035 with the passcode ‘5490256#’."

The share price seems to have run out of steam since lunchtime...

One thing I wonder is how lumpy their earnings potentially could be considering the nature of the business...?

I found this comment in the interim report interesting as it appears to fly in the face of other comments they have made previously about moving towards portfolio investments and away from single case/binary investments:

...the Petersen investment, while large, is not some one-off extraordinary item that should be treated separately; rather, it is the epitome of our core business. Investments like Petersen and Teinver – large, complex claims requiring financial wherewithal, great lawyers and the kind of significant diligence and management that we routinely provide – are our stock in trade, Burford’s raison d’être. If anything, as time has passed, we have gravitated more to large matters like Petersen and Teinver, notwithstanding their potential lumpiness and volatility

Given the rates of return on offer, it is possible that litigation funders are leaving themselves open to claims of usury and champerty, as the Ireland ruling a few months back demonstrated. 

However it is interesting that regulatory risk barely gets a mention in any of Burford's annual reports since the company incorporated, not even in the risks section. The only exception is the 2015 report so it's worth quoting that at some length to get an understanding of their take on the issue:

The bulk of Burford’s business is commercial finance – providing capital to businesses in multi-million dollar transactions. As a general proposition, commercial finance activities of the size conducted by Burford are not regulated in most jurisdictions. Company X is generally free to lend money to Company Y, or to lease equipment, or to factor receivables, without a governmental regulatory agency becoming involved or overseeing those activities. To be sure, some commercial financial providers are regulated for other reasons – banks are regulated for being banks, for example – but we do not see any significant movement to introduce regulation of commercial finance generally.

However, that is not the end of the story, because most of the assets that Burford is financing are related to litigation or arbitration and exist within and under the supervision of the judicial system. That system is not a regulatory one in the sense to which investors have become accustomed in the financial services world, and it tends not to operate through regulatory agencies, but instead pursuant to complex rules enforced by the justice system itself which vary widely by jurisdiction (and can even vary considerably within a single jurisdiction based on type of case). For example, different adjudicative systems require different types or levels of disclosure of interests in a litigation matter or in the litigants, or prior approval of various economic arrangements. Burford complies with the rules applicable to its activities in each jurisdiction and adjudicative system in which it operates.

As a result of this existing and pervasive system of judicial supervision, many jurisdictions, including the US, have concluded that no specific regulation of litigation finance is needed. For example, the Advisory Committee for the US Federal Rules of Civil Procedure has concluded that US judges already have the powers they need to obtain any desired information about litigation funding, and that no further action was needed. That is a sensible decision; it would be wrongheaded to suggest that litigation finance firms like Burford should be treated differently than the many other constituents with interests in pending litigation.

There are nonetheless occasionally suggestions (generally from special interest groups opposed to litigation proliferation generally) that a further regulatory envelope should be created specifically for litigation finance. Given Burford’s size and the pace of the development of the litigation finance market, such an approach might well be to Burford’s benefit in creating barriers to entry for smaller, less experienced and less well-capitalised firms, but we nonetheless see no need for it nor do we see a groundswell of activity in that direction.

It is possible that Burford are being blasé about the risk, but they are a bunch of lawyers (is 'bunch' the correct collective term for lawyers?) and as such would tend to be risk averse. If it was genuinely a material risk to their business I would expect them to have included all sorts of disclaimers in their communications.

Very happy with my Burford Capital (LON:BUR) investment but you've always got to look for the negatives ...

... and you've got to reckon that if a company gets involved in funding litigation against sovereign governments then at some point those governments will look to introduce regulation. In addition cases as Peter Thiel's secret funding of the litigation against Gawker don't tend to help. Burford themselves have pointed out that this doesn't really have anything to do with their business, but history suggests that governments don't always apply business logic to regulation, particularly where it's costing them money.

The issue with this, of course, is if it does happen we won't see it coming. Just sayin' ....

timarr

I believe as factor investing becomes more popular finding the likes of Burford that doesn't fit into easy analysis will be the key to good returns.
Quality will out eventually - hopefully.

And Stockopedia ranks Burford Capital (LON:BUR) as a "Momentum Trap" with a value rank of 14. Hmm..

Great quote from N1+Singer this morning, saying if the return from the Peterson case is the norm "then there is probably no target price high enough to capture this!".

Great share & one of the only companies whose annual report is an entertaing read.

Re. Burford Capital (LON:BUR) Looking at the full 1H report, eps for 1H is 63.89 cents (+150%); Broker Forecast for full year is 88 cents.
They really don't need to do much in 2H to exceed consensus broker forecast.

Re. Burford Capital (LON:BUR) Just Wow! They have smashed the ball into the next county! A big thankyou to Jane.

Crikey. I was optimistic and this exceeds my expectations.
First half profit greater than the whole of 2016, which was itself a record year!
And they continue to innovate and grow at a rapid pace.

As Jane says, tremendous results.

Tremendous half-year results from Burford Capital (LON:BUR) :

"Burford Capital Limited ("Burford" or the "Company"), a leading global finance firm focused on law, announces its financial results for the half year ended 30 June 2017.

Highlights

?
Best ever results in Burford's history: 1H 2017 profit exceeds record profit for full year 2016


?
Income increased by 130% to $175.5 million (H1 2016: $76.2 million), driven by a 148% increase in investment income to $161.6 million (H1 2016: $65.3 million)


?
151% increase in operating profit to half-year record of $155.0 million (H1 2016: $61.7 million), and 170% increase in profit after tax to $142.7 million (H1 2016: $52.8 million)


?
Interim dividend of 3.05¢ (H1 2016: 2.67¢) declared, at the rate of one third of total 2016 dividend - an increase of 14% over last year's interim dividend. Interim dividend payable on 15 November 2017 with record date of 20 October 2017


?
Strong demand for Burford's capital, with record new commitments to investments of $488 million (comprising $226 million from our balance sheet and $262 million from our investment funds), $289 million of which already deployed


?
Record investment performance underpinned by 11 investments, including largest cash generation from a single investment in our history, the sale of 25% of our ongoing Petersen investment


?
Cash generation of $173.7 million from investments on balance sheet, exceeding every previous half-year period


?
Oversubscribed retail bond offering, raising £175 million at a 5% coupon, to further support client demand and future growth


?
Gerchen Keller acquisition and integration successful and well-received, first fund starting to generate performance fees. Burford's new investment management business closed largest investment fund ever raised in sector, at $500 million, to invest in complex strategies"

http://www.londonstockexchange...

https://www.rns-pdf.londonstoc...

There's an interesting commentary here on the ICSID arbitration award in favour of Teivner/Marsans/Burford. It is from a very well regarded business news site in Argentina.

http://m.iprofesional.com/notas/253253-El-fondo-que-financio-el-juicio-contra-el-Estado-por-Aerolineas-logro-un-premio-de-us140-millones

In the section "cautela y negociación", there is this text:

"En ese sentido, un mensaje del presidente Mauricio Macri por las redes sociales estuvo lejos de rechazar el fallo: le adjudicó responsabilidad por la deuda a pagar al gobierno de Cristina Kirchner, precandidata a senadora por Unidad Ciudadana en las próximas elecciones.

“Por la inmensa torpeza y arrogancia que el gobierno anterior tuvo con Aerolíneas el país fue condenado a pagar u$s320 millones más intereses”, escribió Macri en Twitter.

“Nos llega esta condena en el mejor momento de la historia de Aerolíneas y los vuelos comerciales, con récord total de pasajeros transportados”, agregó para luego afirmar que “nada detendrá a la revolución de los vuelos que está en marcha uniendo al país, llevando cada vez a más argentinos con mejores tarifas”.

Así, se desprende que para el jefe de estado, el fallo es justo. Sin embargo, no se podía esperar otra reacción del Presidente en plena campaña electoral y a 20 días de las PASO en la que el oficialismo tendrá un difícil reto con la expresidenta en la provincia de Buenos Aires.

Fuera del ámbito doméstico, se espera que el Estado negocie los términos del fallo en contra."

What they are saying here is that President Macri, in a message on social media, far from rejecting the judgement, instead put the responsibility for it on the past government of former President Cristina Kirchner, who is expected to stand as a candidate for the Senate for Buenos Aires Province in elections to be held three weeks from now and who is expected to put up a tough fight against Macri's party. Macri tweeted that "it was because of the immense sloth and arrogance of the previous government in managing Aerolíneas that the country now stands condemned to pay $320m plus interest" and he goes on to highlight that Aerolíneas, under his government, has recovered and is now performing very well indeed. The article states that one can deduce that for President Macri the verdict is fair, although the article also cautions that this is a time of electoral campaigning and that this response from Macri was thus to be expected.

The article also picks up on Burford's reference to there being often negotiations to arrive at an agreed settlement and seems to be linking this in with President Macri's response to Burford's statement and implying that a negotiated settlement could well find favour in Buenos Aires.

My own view is that while the Macri government is obviously very keen to put to rest Argentina's dismal past record of fighting continually against the international financial community, local politics are inherently unstable and political necessity could blow this off track. Only last month, Argentina was able to raise in New York $2.75bn in 100-year bonds (yes, really!) and for Argentina to go back to its old ways of fighting every last decision they don't agree with would likely put the shutters up once more against international bond issues. In the grand scheme of things, the Marsans/Burford judgement is very small beer for Argentina and it would be in their interest to settle the matter quickly and get it over and done with.

The much bigger "Petersen" claim (also a Burford case) in respect of the expropriation of the YPF energy group is coming fast down the tracks and that is likely to give President Macri even greater opportunities to open up numerous cans of worms about the alleged corruption on a gigantic scale of past Kirchner governments. It may well suit Macri now to settle this relatively small Aerolíneas case, keeping Argentina on track to access international money markets while also using the judgement as a political weapon locally, as a precursor to the Petersen/YPF judgement also perhaps going against Argentina which would be the real political bazooka.


All IMHO, DYOR.

Hi John
I agree, I would be very surprised if it wasn't above forecasts.
N+1 Singer have already said after todays news they expect to substantially increase full year expectations after H1 results are released on Thursday.
But I guess we must all be positively bias towards the stocks we own or we would not own them ; )

I have a feeling that Burfords caveat this morning about broker forecasts is a forewarning that the news on Thursday will not be what the forecasts predict.
I love the conservative nature of their RNS's & I believe that the forewarning is for a major beat, or maybe its just wishful thinking on my part as they are my largest holding.
Fingers crossed for Thursday.

I have found some info on an Argentine site which refers to the way that Burford is remunerated. It is in Spanish (I am a translator) and I won't translate the article but you can use Google Translate, should you wish to do so.

This para states that Burford would be entitled to an amount of "about"  four times their investment (hence, say, four times Burford's costs of $13m, ie. $52m), then 40% of the first $100m (I assume they are interpreting this as meaning the first $100m after the $52m), then 30% of the balance.

On an award of $324m, this would work out at, firstly, $52m (ie. 4 x $13m) plus, secondly, $40m plus, thirdly, 30% of ($324 - 52 - 100), that is $51.6m, adding them up we get to $52m plus $40m plus $51.6m, a total of $143.6m, which is about the figure Burford are quoting.

"El negocio de Burford ha sido brutal, con una plusvalía del orden del 1000%, ya que solamente ha gastado 13 millones. El acuerdo al que llegaron los dueños de Marsans con estos buitres, al que luego se adhirió la administración concursal de Air Comet, establecía que cobrarían una cantidad fija del orden de 4 veces el dinero que hubieran gastado hasta el fallo del CIADI, más unos porcentajes escalonados, según la indemnización conseguida, un 40% de los primeros 100 millones, y el 30% para el resto hasta 500 millones."

http://www.lacelosia.com/el-fondo-burford-que-compra-y-financia-pleitos-se-lleva-el-43-de-los-324-millones-de-dolares-de-indemnizacion-de-argentina-marsans/

Imo, if this is the model of reward that Burford are using in their contracts, it's very clever, their costs get fully covered first (and with a 300% profit!)  and then there's a tremendous incentive to push hard for a great chunk out of award beyond this.

(PS: I have no idea where the site got this info. A leak from inside one of the Argentine parties, perhaps?).

Two decisions in cases backed by Burford.

One win, in that involving Aerolíneas Argentinas,
one loss, in the Mastercard case.

http://www.4-traders.com/BURFORD-CAPITAL-LIMITED-5668352/news/Burford-Capital-Reports-Favourable-Investment-Result-24803434/

http://www.legalbusiness.co.uk/index.php/lb-blog-view/10492-court-rejects-landmark-application-for-14bn-class-action-against-mastercard-in-freshfields-win

I have a Burford Capital (LON:BUR) query I'm hoping one of you kind folk can help me with.

I've taken a look at some reports from 2016 to try and understand some of the figures.
What I'm trying to understand is what the difference is between:

1) Investment Commitments stated as $378m in the FY2016 results (http://otp.investis.com/clients/uk/burford_capital/rns/regulatory-story.aspx?cid=1377&newsid=852966)

2) Investment Commitments stated as $326.8m on their website/the 2016 Annual Report.
(http://www.burfordcapital.com/investors/investor-information/concluded-investment-performance/)

Why is there a difference in these figures? Surely they should match?

Any insight would be appreciated.

Abtan

Im looking at H&L

Wheres the 1.6 million pound sell at 12.09?? Or all the others?


RECENT TRADES BY VOLUME
Select time periodTodayLast 5 trading days
The London Stock Exchange does not disclose whether a trade is a buy or a sell so this data is estimated based on the trade price received and the LSE-quoted mid-price at the point the trade is placed. It should only be considered an indication and not a recommendation.

Trades priced above the mid-price at the time the trade is placed are labelled as a buy; those priced below the mid-price are sells; and those priced close to the mid-price or declared late are labelled ‘N/A’.

Time / date Buy / sell Volume Price Value
16:35 - 16/06 Sell 343859 849.00p £2,919,362.91
12:09 - 16/06 Sell 200000 847.50p £1,695,000.00
11:39 - 16/06 n/a 50000 846.50p £423,250.00
16:25 - 16/06 Sell 25000 853.00p £213,250.00
09:53 - 16/06 Sell 18360 846.21p £155,364.16
15:18 - 16/06 n/a 13386 849.75p £113,747.54
12:46 - 16/06 Buy 10729 858.68p £92,127.78
14:47 - 16/06 n/a 10000 856.50p £85,650.00
09:47 - 16/06 n/a 10000 845.00p £84,500.00
12:45 - 16/06 Buy 10000 858.71p £85,871.00
11:00 - 16/06 Sell 6783 847.18p £57,464.22
15:16 - 16/06 n/a 6635 849.75p £56,380.91
15:13 - 16/06 n/a 6401 850.75p £54,456.51
11:38 - 16/06 Sell 5900 847.37p £49,994.83
11:38 - 16/06 Sell 5900 847.37p £49,994.83
12:47 - 16/06 n/a 5888 861.50p £50,725.12
12:47 - 16/06 n/a 5886 861.50p £50,707.89
12:47 - 16/06 n/a 5837 861.50p £50,285.76
12:41 - 16/06 Buy 5000 855.00p £42,750.00
15:19 - 16/06 Sell 5000 850.62p £42,531.00 ×

Some huge Sells today... roughly 6 millions pounds today the biggest tranche was a 2.9 million pound sale after the clock at 16.35pm.... Its going to continue down then track sideways and go up (eventually) - Williams R% is flat scraping the floor and cant go any lower.... Buying in the dips is the only way to make serious cash.. My point and figure chart which is rarely wrong has a reversal to a low of 661..(That will change when it start going up again) I value this at 1500 using Benjamin rule..(that will take a long time).... I will hammer back in when my chart reverses... The more is goes up (it will go up a lot) the more volatile it will be... I cannot remember it ever dropping more than 5% in one go on a 10 year chart.... we are down 12% in a week now.... Monday will open lower I think , with the sheep following the herd.. I will just keep and eye on the volume..

Jane an excellent well written explanation

Thankyou

Re. selling positions in Burford Capital (LON:BUR) my concern is that I have little idea:
a) when profits will come to fruition (years?), and
b) where profits are actually coming from

It reminds me a little of XLMedia (LON:XLM) which has good financials, but doesn't divulge which websites it owns, making it difficult to validate the viability of its income streams.

I must admit to having held BUR in the past, but sold out most of my holding after a nice gain due to the the niggling concerns mentioned above. I've kept a small position, but will sell out if the share price dips materially.

Interesting how BUR qualifies for the short selling screen "James Montier 'Unholy Trinity' Screen"-
. Out of 90 Qualifying (virtually all are dogs) only 3-4 have some history of upward climbing and consistent performing....

http://www.stockopedia.com/screens/james-montier-unholy-trinity-screen-12/?display=charts&region=gb#display

James Montier 'Unholy Trinity' Screen

The last part of the document submitted on Tues sums it up for Argentina,they cannot use the fact they are a state to escape being prosecuted in the US... This is one of the one of the biggest cases they have at worth at least 3 billion dollars... They are still squabbling about where it can be heard... Will take years to complete and get the money

"Because Argentina acted commercially in raising capital and forming a commercial contract, “the subsequent breach of contract cannot be cloaked in immunity.” Weltover, 941 F.2d at 151. Respectfully submitted, /s/ Michael"



June 13, 2017 Via ECF Catherine O’Hagan Wolfe United States Court of Appeals for the Second Circuit Thurgood Marshall United States Courthouse 40 Foley Square New York, NY 10007 Re: Petersen Energía Inversora, S.A.U. v. Argentine Republic, Nos. 16-3303-cv(L) & 16-3304(con) Dear Ms. O’Hagan Wolfe: We write in response to YPF S.A.’s June 12 letter citing Bolivarian Republic of Venezuela v. Helmerich & Payne International Drilling Co., 137 S. Ct. 1312 (2017). Helmerich has little bearing here. Plaintiffs in this case did not advance a “nonfrivolous argument” standard for assessing the applicability of the commercial-activities exception. Nor did the district court adopt that standard. Rather, it acknowledged that the FSIA requires it to resolve factual disputes to the extent necessary to determine jurisdiction. See SPA-11-12. Helmerich involved the FSIA’s expropriation exception, which requires a “valid claim that ‘property’ has been ‘taken in violation of international law.’” 137 S. Ct. at 1318 (emphasis added). The Supreme Court noted, in the context of that exception, that “merits and jurisdiction” may become “intertwined” because the plaintiff must demonstrate an international-law violation as part of its jurisdictional showing. Id. at 1319. But the commercial-activities exception does not require a similar merits showing. Whether an action is “based upon” commercial activity is assessed by reference to the nature of plaintiffs’ claims — i.e., the “gravamen of the complaint.” OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390, 395 (2015). Nothing in Helmerich casts doubt on the district court’s straightforward FSIA analysis. The gravamen of plaintiffs’ claim is that defendants breached contractual obligations they entered into while raising billions of dollars in capital in the United States, facts no party disputes. As this Court stated in Weltover, and the Supreme Court unanimously affirmed, Catherine O’Hagan Wolfe June 13, 2017 Page 2 “[o]nce a sovereign enters the marketplace as a commercial actor, it ‘should be subject to all the rules of the marketplace.’” Weltover, Inc. v. Republic of Argentina, 941 F.2d 145, 151 (2d Cir. 1991), aff’d, 504 U.S. 607, 614, 617 (1992). In pointing to supposed “conflict[s]” that would explain why defendants breached their commercial obligations, Letter at 2, YPF proposes an inquiry the FSIA expressly forbids. See 28 U.S.C. § 1603(d) (commercial activity assessed on the basis of its “nature,” not its “purpose”). Because Argentina acted commercially in raising capital and forming a commercial contract, “the subsequent breach of contract cannot be cloaked in immunity.” Weltover, 941 F.2d at 151. Respectfully submitted, /s/ Michael

Nice ,thats for that

Yesterday info

Plaintiff - Appellee - Petersen Energia Inversora, S.A.U. Plaintiff - Appellee Petersen Energia S.A.U. Defendant - Appellant Argentine Republic Defendant - Appellant - YPF S.A. There are shed load of documents for this case, the last document filed is: BL-80 June 15, 2017 Request CASE, before RKW, GC, DC, C.JJ., HEARD.[2058974] [16-3303, 16-3304]

Same Plaintiffs & Defendants Last updated Jun. 13, 2017 at 05:53 PM Last document filed: BL-54 June 12, 2017 Request ATTORNEY, Shaud Gerard Tavakoli for Argentine Republic, in case 16-3304 , , ADDED.[2055856] [16-3303, 16-3304] Still ongoing

Docket for Case #: 16-3303
The last document filed is not currently available electronically, it needs courier retrieval...

---- http://linkedin.com/in/shaud-tavakoli-7a4ba31

For Argentina An associate , Really?

Either this guy hasnt updated his profile on linkedin,Or hes good. You would think a partner (higher than a associate) would be representing Argentina. Even though hes more than qualified...Surely they would only want the top --- -------------------------------------------------------------

"An associate may be a junior or senior attorney, but normally does not hold an ownership interest in the firm even if associated with the firm for many years. First-year associates are entry-level junior attorneys and are generally recent law school graduates in their first year of law practice"

This is the order that the Argentines are appealing against:
http://www.leagle.com/decision/In%20FDCO%2020161027963/Petersen%20Energia%20Inversora,%20S.A.U.%20v.%20Argentine%20Republic

As was to be expected there was no decision made today in respect of the Argentinian appeal in the Petersen case, and it could be some weeks or months until there is. Personally I thought the previous judgement was clear and is likely to be upheld, but I am not a lawyer.


https://www.clarin.com/ieco/economia/argentina-pidio-ee-uu-juicio-ypf-traslade-pais_0_ByxxeHxXb.html

Docket number
16-3303-cv

Docket number
16-3304-cv

Ok got it from an argentine news channel

10am courtroom 1703 nyc

Peterson energia inversora ,et al
V argentine republic ypf s a

Time alloted 12 mins.... To convince 3 judges ..

Problem is Argentina may have a case...

But as you say, Repsol sued Argentina and won in the US so not sure what happens...makes a mockery of the sovereign act

"The Foreign Sovereign Immunities Act (FSIA) of 1976 is a United States law, codified at Title 28, §§ 1330, 1332, 1391(f), 1441(d), and 1602–1611 of the United States Code, that establishes the limitations as to whether a foreign sovereign nation (or its political subdivisions, agencies, or instrumentalities) may be sued in U.S. courts—federal or state. (In international law, government protection against lawsuits in foreign courts is known as state immunity; government immunity in domestic courts is known as sovereign immunity.) It also establishes specific procedures for service of process, attachment of property and execution of judgment in proceedings against a foreign state. The FSIA provides the exclusive basis and means to bring a lawsuit against a foreign sovereign in the United States. It was signed into law by President Gerald Ford on October 21, 1976.[6]"

This was the response I got via got email from Burford a few days ago

"Dear Sir,

I can confirm that there is a hearing on 15 June. But for clarity, this upcoming hearing is an oral argument on the defendant's appeal of the district court's denial of their motions to dismiss based on the argument that they are immune from jurisdiction in U.S. courts under the Foreign Sovereign Immunities Act"

This is probably why its diving... Especially with BURFORDS negative RNS a few days before the hearing today.. Why would you sell a few days before a major appeal hearing of where the case will be heard...... Clever or daft I don't know?... If the hearing today cant be overruled then it will be heard in Argentina not the US. If its overturned then it will be heard in the US.. Still a very long way to go ... years..

" Despite Burford's enthusiasm for the Petersen claims, there is significant risk in all litigation and Burford regards these sales as prudent risk and balance sheet management transactions"....

Today 15thy June 2017 is the Appeal hearing at the NYC court of appeal to see if BUR can sue in the US or have to go to Argentina for the Peterson case. The hearing is just about if they can overrule the previous decision that barred them from Suing the Argentine government in the US. There will be no result to the actual case its just the jurisdiction where the legal practice can happen ..Obviously you want it overruled from the previous announcement where they CANNOT sue Argentina in the US... Expect an RNS any time... Probably tomorrow morning..

http://www.hardmanandco.com/docs/default-source/company-docs/burford-capital-documents/14.06.17-positive-judgement-from-the-secondary-market.pdf

"Little more than an exercise in educated guesswork"

More tranches of the Petersen claim sold, representing a greater percentage of the case at an even higher implied full value:

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/BUR/13257908.html

"Burford Capital Limited ("Burford" or the "Company"), a leading global finance firm focused on law, announces that it has sold further participation interests to institutional investors in its possible future proceeds from its investment related to the Petersen claims.

Yesterday's sales represent a further 15% of Burford's economic entitlement from the Petersen claims for a sale price of $66 million, implying a total value for Burford's economic entitlement of $440 million.

The sales are in addition to prior sales in March 2017 and December 2016 in which Burford sold 10% of its economic entitlement in the Petersen claims for a sale price of $40 million, implying a total value at that time for Burford's economic entitlement of $400 million. Thus, Burford has now sold a total of 25% of its economic entitlement in the Petersen claims for a total of $106 million and continues to hold 75% of its original economic entitlement.

Despite Burford's enthusiasm for the Petersen claims, there is significant risk in all litigation and Burford regards these sales as prudent risk and balance sheet management transactions. Burford has agreed that it will not engage in further sales of its interest in the Petersen claims at an implied value of less than $600 million and that Burford will not reduce its holding below 65% until after 31 December 2018 and will permanently hold at least 50.1% of the economic entitlement in the Petersen claims.*

With their costs already fully recovered, this $66m is, I believe, pure profit, as would be further sales or eventual recoveries from this case.

In a note just issued, Liberum point out that the ROIC for this case so far is of 489% and that  a successful conclusion of the case could bring Burford a pay-out as high as $1.125bn.

IMHO, DYOR.

So I emailed burford..on a sunday and they came back to me on sunday..Impressive

"Dear Sir,

I can confirm that there is a hearing on 15 June. But for clarity, this upcoming hearing is an oral argument on the defendant's appeal of the district court's denial of their motions to dismiss based on the argument that they are immune from jurisdiction in U.S. courts under the Foreign Sovereign Immunities Act.

Best,"

Basically nothing is going to resolved very soon.....Im still betting on years....its just a hearing to discuss if they can be sued in the US as they were rejected to do so before

This was from 6 months ago but does show that although if you win,money is held in tax exile and hidden away hence burfords estimate of 60% rebate or less and that could take years to get..

"Shares in Burford, which have achieved a five-fold increase in the past two years, jumped another 7.4% today after the AIM-listed investment company confirmed it could recover close to 60% of any pay-out by Argentina relating to the controversial nationalisation of energy company YPF in 2012."

Look at chevron v ecuador backed by litigation funders.. Thats in its 18th year!!!
Chevon lost,then ecuador lost in higher courts,back and forward and its still going on

https://business-humanrights.org/en/texacochevron-lawsuits-re-ecuador

Unfortunately having worked in the legal sector nothing "is very soon. Very soon , means years.." and yes you can win but it can take years to collect the money if you get the full amount

Good luck trying to get any money out of argentina. Burford are invested in hundreds of cases and above is just some of them

Yes lots of articles out there...

Bank litigation soars by 37%

Litigation funders queue up to hit banks https://www.thetimes.co.uk/edition/business/litigation-funders-queue-up-to-hit-banks-qgdr9xzlw?CMP=TNLEmail_118918_1770775

So far they have been lucky , obvoiusly you only need a few large cases to lose but theres no way you know the cases they are invested in.

If the law changed where cases had to disclose if they are being funded by 3rd party litigation then there could be trouble(which there was some talk about)

In ireland its banned

This is a good website to keep up to date with any news

http://www.litigationfutures.com/news/champerty-holds-firm-ireland-supreme-court-rejects-third-party-funding

I have a lot of money in BUR

"This week, three members of the Burford Capital patent team were named to the 2017 Intellectual Asset Management (IAM) Strategy 300"

http://www.burfordcapital.com/blog/2017-iam-strategy-300/

Another advantage is all the money is off the balance sheet.. So not registeted like a loan and it also gets round banking regulations in the US (the main benefit in the US)

When I worked at a world top 5 law firm in the city they were bang into pushing this 3rd party funding..Its the future

http://www.ciarb.org/docs/default-source/ciarbdocuments/events/2016/december/das-convention-presentations/craig-arnott.pdf?sfvrsn=2

Or this one on how it works on the balance sheet side

http://www.burfordcapital.com/blog/litigation-costs-what-finance-execs-should-know/

Both are heavy reading..sorry

Sorry, regulation is the only thing stopping BUR and the above (I posted in wrong order) would slow it

There is an ex UK minister calling for regulation. 3rd party litigation is still banned in Republic of Ireland so market here is small.

To the ones who dont know. The business model simply is they lend you the money to sue someone and they take cut..Its cheaper than borrowing money from banks and can be accounted for differently.

Also suing state goverments can be virtually impossible..They take it on and chase the payout so to lesson the risk

Having worked in legal ,3rd party litigation is the latest thing and will grow masively

Cfpb is the USA version of the FCA
------

Dear J

Thank you so much for your message. Apologies for my delay in responding as I was moving cross-country during all of last week. Thank you for forwarding me this article, as I was unaware of its existence or the fact that I was quoted in it. My statements regarding the CFPB are just my educated guesses based on my research. I have not yet seen any specific instance of the CFPB taking further action against third-party funders. I also doubt that the current administration will direct the CFPB focus on regulating third-party funding. I have no sources on this, just a hunch. My instinct is that the industry will continue on its current course with little or no federal government interference. At the state level, however, there are wide ranging responses from statutes to court cases to bar ethics opinions. The states all take different views regarding third-party funding. Thus, I predict that the states will shape the future of the third-party funding industry in the United States rather than the federal government.

I hope that this is helpful. Have a pleasant week!

Kindest Regards,
...

-----------

This link may be interesting to anyone else who may also be trying to follow in some detail, even in the minutaie, the different cases that Burford Capital (LON:BUR) are involved in.

http://kluwerarbitrationblog.com/2016/04/20/the-bad-faith-conduct-of-arbitration-by-states/

This one is not the Petersen/YPF case before a New York judge, the case recently mentioned in one of Burford's RNS's but is a second case, also against Argentina and is in respect of the nationalisation of Aerolíneas Argentinas. The claim is for US$1.4bn and the proceedings have been going on for five years now before ICSID, the International Centre for the Settlement of Investment Disputes, a court under the aegis of the World Bank.

This case is now at last on to its final stages, all the submissions have been heard and judgement ought to be issued quite soon (well, perhaps, courts being what they are!) and I wonder how the imminence of this judgement has been accounted for by Burford Capital (LON:BUR).

The writer of the articled linked to refers in this way to various activities reportedly carried out by the Argentine Government:

"Indeed, the complaints by the Claimants highlight some of the tools of the toolbox which are available to States in order to intimidate and pressurize not only Claimants, but also their lawyers and even their third party founder"

I have read several articles that appeared in the Argentine media and viewed a press conference by Argentine officials and have read through the ruling of the three-judge tribunal on this aspect of the case. The press articles (in Spanish so I won't post them) are, to me as a layperson, horrifying. The claimants, including Burford, seem to be understandably concerned and alarmed (as I would be, in their position).

Should the case be decided in favour of the claimants, then there would be a big profit for Burford Capital (LON:BUR), in principle, although enforcement of the judgement would perhaps be another matter?

The Burford lawyers will well and truly have earned their money on this one!

I think quality has fallen because debt has risen and the Piotroski F-Score is down, also I think the Altman score is down. I don't have any historical figures to compare with pre and post results. Value has risen due to EPS up 75% but share price is only up 10%. I think if you took the acquisition out of the figures then the SR would be much higher.

http://www.investegate.co.uk/berenberg/rns/proposed-placing-of-existing-ordinary-shares/201703161645297405Z/ More GYM (LON:GYM) stock available now...

Graham -
Re. GYM (LON:GYM) I have looked in detail at this company's FY2016 accounts and find it in a virtuous circle of growth with no debt and entirely financed by its existing estate. Here are the mechanics for FY2016.

- at the start of the year there were 74 gyms and the company added 15 new gyms. These generated £73.5m in revenues
- that gives EBITDA £22.7m ( @31% margin)
- OCF conversion is a remarkable 109.9%. So OCF = £24.9m (which is net of maintenance capex)
- expansionary capex = £20.9m
- @ 1.4m per new gym, that gives 20.9/ 1.4 = 15 new gyms
- and the cycle is complete !

In this process, the company took on no debt and better still its net cash position at the end of year was £2m higher.

On a mature basis, each site generates £476K in EBITDA. So each gym's payback period is roughly 3 - 4 years.

Looking at the coming financial year, a little bit of modelling shows that the company can open 18 new gyms based on year 2016 assumptions, and all organically without raising a sou.

Clearly this is not a perpetual money making machine as it must at some point reach saturation point, attract more competition, be subject to any change in popularity/ customer satisfaction.

However as a medium term investment, this looks very attractive and I bought a decent size this morning.

Regards, Ram

ps. all data used above is the company's own and taken from their published accounts or presentations.

Burford Capital (LON:BUR) I notice Stockopedia has updated it's figures following the results but rather surprisingly the SR has fallen 13 points to only 42, the problem seems to the Quality which has fallen by 23 points. Is this because of the recent acquisition that is making the figures look worse? 

These two articles from law news sites add quite a bit of colour to £BUR's market scope, business model, prospects and ambitions:

http://www.law.com/sites/almstaff/2017/03/14/with-profits-up-75-percent-burfords-results-reveal-evolving-litigation-funding-industry/

https://www.cdr-news.com/categories/litigation/featured/7137-burford-results-reflect-shifting-market-attitude

Burford has grown to be my largest holding at almost 10% and I believe continues to look like a very exciting investment.

I have to say I find its accounts are somewhat unusual and complex to follow as a whole compared to other businesses I invest in. This is somewhat off-putting but the basic business model is clear and I find its reports very clear and well written. Interestingly compared to other businesses they seem to talk more directly and in more detail about things I am interested in like the size of the addressable market and the threat of competition.

At a high level it seems pretty clear that while it is not immune from competition, it is the largest player with some competitive advantages in a newish market with a lot of growth potential. The business model appears very profitable - its track record of profitability on its investments so far is very good and I think proves the business model. There appears to be lots of opportunity for it to reinvest its cash profits and substantial scope for further compound growth. It looks like a high quality growth business with a lot of momentum - just the sort of thing I like to invest in.

Thanks for the Burford comments. I know the company reasonably well but it is always interesting to see what someone coming at it fresh makes of it. I agree brokers will find it hard to do any sensible forecasts or valuation - I think this is a limitation of traditional excel spreadsheet models and not because the brokers are stupid.
Excel is good for forecasting businesses that grow earnings at a steady x% a year, that then generates a precise target price.
But I wouldn't know how to use excel to generate a target price for the sort of probalistic intangible legal assets / asymetric payoffs which is what Burford is all about.
I like the written style of Chief Exec's statements, it is my favourite Annual Report to read. That gives me confidence in their balance sheet.

Paul/Graham

Any chance you could look at Somero Enterprises Inc (LON:SOM) and Manx Telecom (LON:MANX) today?

One last comment on Burford Capital (LON:BUR) prompted by listening to the earnings call recording. The results today are basically "legacy Burford". They only include two weeks of the Gerchen Keller acquisition, so that's a further upside to come.

Graham thanks very much for another excellent blog. As a holder of French Connection (LON:FCCN) I would appreciate it if you could back up what you mean about the Chairman not treating other shareholders properly in the past and what could potentially happen - i.e. how could he mistreat other shareholders in the future? This would help form a balanced view of this potential risk factor. Thanks again.

If The Gym group were the only entrant in this low cost sector, purchasing stock would be almost a no brainer.

However, there are several of these low cost gym groups around so figuring out how many years we have until market saturation is the tricky part.

I spotted 3 very similar low cost gym chains within about 2 minutes drive in my local town. The Gym seemed to be the quietest.

Scott.

No Paul Sott for a week!
Whatsup?
apad

The Burford share has been my most successful investment in recent years and I came across the company at a Share Soc event in Peterborough a few years agowhere both Ed and Paul Scott were also speakers . Burford CEO Chris Bogart gave a samll presentation to about 15 of us and at that time not many people knew about litigation financing - he was very straight forward and quite impressive and on my return home I bought some of the shares and I have not regretted that decision .At the time Chris Bogart went out of his way to develope a small shareholder base and I think Paul has interviewed him a couple of times since .The market thye operate in is still in its infancy with very few players the size of Burford - I cannot see the share going anywhere else but north and long may it continue .

Graham,

I'm of the opinion that French Connection should leave some retail stores open for click and collect, also to preserve some branding on the High Street. (15 stores or less) With that strategy, I can see the shares going higher because management focuses on their two profitable divisions. Also, it stops the rot in reporting another year of losses (together is five years and counting).

More urgency from Mr Stephen Marks. By the way, the guy lost 92% of his net worth in 12-years, remarkable.

Also, is there a chance of Mike Ashley coming in to bid for French Connection at 55p/share? He is worth £2.4bn or 80 times more than FCCN.

I wanted to add a belated add re the comment on 25% weighting in one share from yesterday.

Firstly it goes without saying that even if one disagrees strongly with either author
- there is a respective way to express one's view point. Thus no surprise for the negative votes.

Theoretically the point is correct - 25% in one share is 'risky', but investing is an art form about risk and reward.
To me criticising the positon is ignoring 2 glaringly obvious points:
1 - is some-one wants to have a concentrated portfolio that is their prerogative,
especially since the individual is very aware of the usual % guidances etc...
I thought a more appropriate comment would be thanking graham for disclosure because I, the reader, can then be more aware of (subconscious) any holder bias and digest the analysis as I see fit.

2 - given that Graham has reviewed (at least) hundreds of investments for their current risk / reward, the fact that he choose to allocate 25% of his funds to one particular share states to me, logically, that he sees that particular share as offering particularly good risk/reward (per his criteria).

I am mindful of Paul's regular comment that he changes his view as the information changes and it is a common investor mistake to be anchored to a previous opinion. i.e. even if our personal strategy is 20 share at 5%, or 50 shares at 2%, we should always be open to the possibility of flexing that opinion if the investment opportunity arises.

Lastly I felt it important to say in advance that if the future price of HAT does fall it does not mean that Graham made an error in his allocation, or diminishes his credibility. Similarly if it rises it doesn't make him a genius.

I am grateful for investors that believe everything they do is right and criticise others because it makes a market.
Investing is about a portfolio of ideas over time and I would also add 'relative to one's chosen strategy'.
To me reading any analysis blindly, not appreciating it's context and not converting it to one's own strategy
- that is indeed "bonkers".

Herbie etc,

I think Burford Capital (LON:BUR) is and has been a classic case of Post Earnings Announcement Drift (PEAD), which is the tendency for this stock’s cumulative return to drift in the direction of its repeated positive Earning Surprises for months following the earnings announcement.

Jane pointed out that BUR have in a 2nd announcement yesterday and have dissociated themselves from ALLbrokers forecasts. In addition Burford have locked in a 2017 win position in the substantive Petersen litigation case - A very clever move. To illustrate just how confused the brokers are; n+1 (their house broker) suggest a +43% share price target, whilst Liberum suggest a more modest target price up +11%.

For me Burford is up +233% today and even after 50% top slicing it is still is my 2nd biggest holding. I think it’s a case of brokers and the market not knowing how to value the litigation funding Goliath that Burford is becoming. If I didn’t hold as much as do I would buy more and take advantage of its PEAD. I will hold now unless the news stream becomes negative. Please though DYOR Ian

The Burford Capital (LON:BUR) results were clearly excellent. On a profit after tax basis they've exceeded broker expectations not just for 2016 but also for 2017 (although note the caveat below on brokers' forecasts)!

I listened in on the conference call earlier and came away with the impression that the management team are very bullish about future growth prospects in a market which they helped to found and which they are leaders of.

• Regulatory risk - it's a nascent industry and regulators are still playing catch up, see e.g. this article
• Poor cashflow - there hasn't been a net cash inflow from operating activities since 2013 and in the 7 accounting periods since IPO the cumulative net cash outflows from operating activities amounts to £302m. This is mostly due to the business still scaling up and increasing its portfolio of litigation investments year on year, but if they are still in growth mode this state of affairs could continue for years, which means further financing is probably required. They've already issued two rounds of retail bonds in addition to the funds raised at IPO, but equity fundraising is presumably also a possibility with the dilution that would entail. In time they may get to a point where profits from their investments are sufficient to fund new investments, but it is not clear to me when or if they will get to that stage
• Key man risk - given how specialised this area is, I suspect the company are quite dependent on the CEO and CIO. Up until 2012 there was a hedge fund style remuneration scheme in place whereby the company's Investment Adviser 'Principals' (one of whom was the current CEO) earned very generous payments. I'm glad to see this scheme is no longer in place, but I would imagine they were able to command these payments due to the specialised nature of the business and their knowledge/experience of it
• They don't provide guidance to brokers when broker expectations are out of kilter (for reasons they have explained on many occasions, e.g. see the disclaimers in this morning's RNS). This can produce upside surprises as we saw today, but there will surely come a time when the opposite applies and results will 'miss' broker expectations by a considerable amount.

Hi Graham,

I'm back on my PC so to answer a couple more of your Burford questions:

The original motivation for the early investors was the search for an investment that is not correlated to the wider market. There's if anything a positive correlation between things hitting the fan and lawsuits being issued. This was coming after the events of 2008.

There has been a switch in public and legal policy in the US, UK, and potentially in future in SIngapore and Hong Kong, towards allowing and even encouraging third party funding of legal cases that was previously thought to be disallowed as champerty, maintenance, or barretry. (http://www.burfordcapital.com/blog/litigation-finance-not-champerty-maintenance-barratry/)
Because of the increasing cost of litigation and the reduced legal aid available, many plaintiffs rely on third party funding to achieve justice.

As Chris Bogart says in the latest report, it's not an area to dabble in. It needs expertise, determination, nerve, and the backing of significant amounts of capital to be credible. Burford have these, and hence in my view have a moat.

Burford have attracted comment due to their investment in the Petersen case against the Argentine government. This could conceivably, eventually, if absolutely everything were to go their way, earn them a sum equal to their current market cap. It's a $3bn claim and they could get more than half. Herein lies the rub with valuing their business. Legal outcomes are inherently unpredictable and they may well not earn a penny from that case. But the outcome is not symmetrical - they have invested $20m and the recent transactions with third parties would put a value of $400m on that investment, which did not hit their latest results. I suspect that was deliberate because they have been conservative in valuing their investments and have not yet as far as I know had to write down the book value of any of them.

Another difficulty is that legal proceedings and Burford's involvement in them are usually confidential. So for the most part we don't know which cases they have an interest in, let alone the likely outcome.

For these reasons, they refuse to issue earnings forecasts and specifically eschew comment on analysts estimates. They refuse to pretend they can predict the future. We have to judge the investment case on the past results.

Their response to this volatility has been to seek to develop more predictable earnings streams. They are now mainly funding portfolios of cases rather than individual lawsuits. As an example, BT is a client for this service. They also bought the Gerchen Keller business. They operate in the same business and were the number two after Burford, but act as a fund manager, investing third party funds and earning a more predictable stream of fees. Burford have funded their business from their own balance sheet, using the proceeds of previous wins alongside their retail bonds.
They also have an arm that works on judgement enforcement. It's one thing to win the case, it's sometimes another thing to track the winnings down.

I'm long - it's 25% of my portfolio. DYOR etc.

I hold Petards (LON:PEG) and agree that the results look good. They say the order book includes £12m for delivery in 2017 which underpins this year's figures. I shall be interested to see what Stocko's computers make of the figures overnight.

Has any reader been in a GYM gym? What was the experience like?

Burford Capital (LON:BUR) figures are well ahead of brokers forecasts, I'm surprised that the share price has not gone up more. I don't agree the share price is toppy, if you check the PE on the latest results it's only about 15 and the PEG on the actual figures would about 0.7, I can see the price getting more toppy.

The second RNS today from Burford Capital (LON:BUR) is also worth a close read:

http://www.stockopedia.com/share-prices/burford-capital-LON:BUR/news/rns/170314bur3417z.htm/?title=further-petersen-secondary-market-transaction

It shows the potential for effectively laying off litigation risk to other investors and thus securing what then becomes effectively a guaranteed win position in financial terms.

I am kicking myself for not having bought Burford Capital (LON:BUR) shares previously. I do however hold a few thousand of the 6.5% bonds they issued which are due for repayment in 2022. You can trade them easily at Hargreaves Lansdown, and no doubt most other brokers. The bond price has risen slightly (and therefore the bond yield has fallen) but it is still a fraction under 6%. Given their increasing financial strength, and the fact that the equity price is perhaps a bit toppy, this might be a good way to buy into the company.

Graham,
Burford s report states
"24 of our management team collectively own Burford shares, totaling 14.4% of shares outstanding"

Page 5
http://www.burfordcapital.com/wp-content/uploads/2017/03/BUR-26890-Annual-Report-2016-web.pdf

Graham. An excellent piece as always. On GYM (LON:GYM), the £25 million pre - expansionary operating cash flow analysis is interesting. 2 points/ questions on how closely this really equates to the long-term steady state cash flow from the existing gyms.

1). In a steady state the change in working capital would presumably be zero. Currently as membership is increasing, working capital will be contributing to cash flow (£5 million in 2016).

2). I am tring to reconcile the stated cash outflow on maintenance capex of £2.9 million, with the accounting PPE depreciation number of £12.7 million. Either the acccountants are being very harsh, or the current cash maintenance capex number is set to increase significantly as the gyms age.

"how big might it be in 5 years? For how many years could it open 15-20 new gyms annually? The mature valuation is what counts"

Do you have any thoughts on this Graham?

I second Burford Capital (LON:BUR) please.

Seconded with Paraic - Blancco Technology (LON:BLTG) thoughts would be useful

Any chance of looking over Burford Capital (LON:BUR) numbers please?

I see FCCN issued results today. Paul has argued strongly for this share focussing on the closing down of expensive leases most initiated in the pre 2007 period and the implicit value held in their license and wholesale businesses. The closing down element is progressing well. The internet business is also growing. The numbers look reasonably good at several levels. Importantly the cash pile is £13.5m which is gradually being whittled away. Anybody spotting anything to be worried about. I hold and plan to continue holding.

FYI there's a good thread on Blancco Technology (LON:BLTG) 's results today here: http://www.stockopedia.com/content/blancco-quotdoes-my-but-look-big-in-thisquot-175374/ Any other thoughts from Graham would be appreciated as always!

Also wondered if ITQ could be revisited - Paul made a favourable review on 1 December following the last trading statement. Full year results appear to be in-line with expectations and the company talks a lot about re-positioning itself, valuation appears attractive to me even after the increase today. Disclosure - I hold shares in ITQ purchased prior to today's announcement,

Not sure if you want to revisit Petards (LON:PEG) again Graham? Full year results today were ahead of expectations for revenue and PBT. Shares currently up 3.6%. Perhaps the mooted reaction is because people were hoping for a maiden dividend which wasn't forthcoming, although the company has decent FCF. Maybe they have an acquisition planned, hence no dividend? Market cap continues to hover around that £10m mark which seems to be a glass ceiling at the moment. Two brokers have upgraded 2017/18 forecasts today and both have a target price of 35p.

Disclosure - I top sliced just under 20% of my holding during the morning which I had planned to do regardless of today's results as PEG was too highly weighted in my PF for a microcap.