The company announced today (3 January 2017) that it has sold several million dollars in participation interests in its possible future proceeds in its investment related to one of its largest claims. While the sales proceeds are immaterial the price of the sales implies a value for the Petersen claims greater than previously predicted.
Litigation is a multi-hundred billion dollar industry and Burford supply financing options to this industry. Burford have a large team of industry experts and each case is considered in detail before any finance is provided. The vast majority of cases are rejected. Financing is a growing area of litigation and Burford as the market leaders are in a strong position to take advantage of that growth.
The impressive returns on investment that Burford has managed to generate thus far have driven up the share price. If the market matures with increased competition and the returns on investment were to fall then the share price would likely fall back commensurately. The management are also quick to highlight that it is unwise to associate any value to outstanding claims as each case may go against Burford.
Burford’s share price has performed well over the last few years and it is the market leader in a growing sector. Whether the company can continue this performance will depend on its ability to continue generating the return on investments that the company currently enjoys. The company must remain prudent on the investments it chooses and management have proved thus far they have the expertise to choose the cases wisely. Competition could also enter the market and increased regulation could impact margins, however the strong management and good sector outlook are positive indicators for Burford.
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