We came across a bullish thesis on Burford Capital Limited on TripleS Special Situations’s Substack. In this article, we will summarize the bulls’ thesis on BUR. Burford Capital Limited's share was trading at $9.32 as of December 2nd. BUR’s trailing and forward P/E were 23.93 and 9.68 respectively according to Yahoo Finance. Investments, Finance Burford Capital Limited provides legal finance products and services worldwide and operates in two segments, Principal Finance, and Asset Management and Other Se ...

A Lady Justice statue. Photographer: Chan Long Hei/Bloomberg Litigation finance is having a bad year. After predicting huge growth as recently as January 2024, the industry is now finding that hedge funds and other sources of capital are pulling back. The situation has led some litigation finance firms to suspend fund-raising rounds, while others are exploring alternative paths to generate cash. Most Read from Bloomberg The industry — a $20 billion market that channels capital from investors to lawyers ...

Core Insights - The litigation finance industry, valued at $20 billion, is experiencing significant challenges, including reduced capital availability and regulatory changes, leading to a contraction in the market [2][3][8] Industry Challenges - Hedge funds and other capital sources are pulling back, causing some litigation finance firms to suspend fundraising and seek alternative cash generation methods [1][2] - Regulatory changes in the UK and US are imposing stricter controls on litigation funders, including requirements for transparency and limitations on profit structures [8] Market Adjustments - Firms like Therium Capital Management are adapting by outsourcing responsibilities to manage costs and maximize investor returns [5] - Litigation Capital Management paused active marketing for a fund due to uncertainties around potential tax changes in the US [6] Performance and Outcomes - Burford Capital Ltd. has seen its shares decline over 25% this year despite a potential $16 billion settlement in a significant case, highlighting the financial pressures within the industry [7] - A notable case against Mastercard illustrates the industry's difficulties, with a claim initially valued at £14 billion settling for only £200 million, raising concerns about funding viability [9][10]

Financial Data and Key Metrics Changes - Definitive commitments increased by over 50% year-to-date, with the overall portfolio up 15% year-to-date, translating to a 20% annualized growth rate [11] - Deployments rose by 61% in the third quarter compared to the previous year [12] - Internal rates of return (IRRs) remained steady at 26% on $3.6 billion of realizations, with loss rates stable [15] Business Line Data and Key Metrics Changes - Capital provision income revenue decreased year-to-date, primarily due to extensions in fair model durations [27] - The total fair value increased from $3.8 billion to $3.9 billion, driven by deployments and realizations [28] - Realizations for the year reached $310 million, with a focus on multi-period performance rather than quarterly fluctuations [33] Market Data and Key Metrics Changes - The company is experiencing a diversified portfolio across various geographies and case types, including arbitration, antitrust, contract cases, and patents [27] - The market reaction to the YPF case has been noted as an overreaction, with management remaining bullish on the case's potential outcomes [10][20] Company Strategy and Development Direction - The company aims to double its business by 2030, with ongoing organic and inorganic growth strategies [11][22] - Management is focused on maintaining a strong alignment of interests as large shareholders and committed executives [19] - The company is cautious about share buybacks, preferring to invest in business growth rather than diverting cash for stock repurchases [21][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's performance despite litigation delays and uncertainties [15][20] - The company anticipates continued momentum in realizations, with more trials and hearings scheduled compared to the previous year [46] - The impact of the U.S. government shutdown on litigation operations has been negligible [55] Other Important Information - The appointment of Bank of America as corporate broker signifies a step forward in market leadership [25] - The company maintains a strong cash position of $740 million, partly due to the recent issuance of $500 million notes [41] Q&A Session Summary Question: Timing of the appeal regarding YPF shares - The appeal is expected to be fully briefed by December, with no fixed argument date yet scheduled, likely extending into 2026 [44] Question: Trajectory of realizations in the coming years - There is a continuing velocity in the portfolio, with more scheduled events than the previous year, indicating elevated realizations as courts catch up [46][48] Question: Details on the change of expected timing for case durations - The impact of duration changes is estimated to be around $40 million-$50 million compared to the overall deployed cost fair value [50] Question: Thoughts on share buybacks and capital utilization - Management is focused on prudent management of the business, weighing the risks of leveraging against the unpredictability of cash flows from realizations [51][53] Question: Impact of the U.S. government shutdown - The shutdown has not affected the litigation portfolio, with courts continuing to operate normally [55] Question: Opportunities for growth through acquisitions - The competitive landscape is evolving, with potential opportunities for growth through acquisitions, though the outcome remains uncertain [57]

Core Insights - Burford Capital Limited reported strong growth, aiming to double its platform size by 2030, with significant cash realizations and a robust portfolio [2][6] - The company appointed Merrill Lynch International as a joint corporate broker, enhancing its advisory capabilities [2] Financial Performance - Burford's financial results for the three and nine months ended September 30, 2025, were announced, with a detailed presentation available for investors [1] - The company highlighted that its portfolio is active, with the highest level of rolling three-year realizations and 61 assets generating proceeds in the current year [2] Strategic Developments - The YPF matter is gaining attention, and Burford is optimistic about its prospects, although the majority of its business is thriving independently of this case [2] - A conference call for investors and analysts was scheduled to discuss the financial results, encouraging pre-registration for swift access [3][4]

Financial Data and Key Metrics Changes - Total revenues increased significantly year to date, reaching $280 million compared to $168 million in the same period last year, with net income rising to approximately $120 million from $24 million, resulting in earnings per share of $0.53, nearly five times higher than the same period last year [17][41] - New definitive commitments for the year to date increased by 71% compared to the same period in 2024, with the second quarter alone contributing $361 million, marking the largest quarter in the last nine [7][26] - Cash receipts year to date totaled $306 million, a substantial increase from $245 million in the same period last year [42] Business Line Data and Key Metrics Changes - The Principal Finance segment reported a fair value of $3.8 billion with unfunded undrawn commitments of approximately $1.7 billion to $1.8 billion, showing significant growth since 2020 [19] - The Asset Management segment generated income of $21 million year to date, reflecting a favorable comparison to the same point last year [41] Market Data and Key Metrics Changes - The company has a diverse geographical exposure, with 51% of assets in North America, 26% in EMEA, and 20% globally, indicating a broad market presence [20] - The asset portfolio is diversified across various sectors, including antitrust, intellectual property, and arbitration, demonstrating a well-rounded investment strategy [20] Company Strategy and Development Direction - The company aims to continue expanding its global footprint and has recently added personnel in Korea and Spain to enhance its market presence [91] - There is a focus on growing the portfolio through new definitive commitments and maintaining a strong capital position to support future investments [52][48] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strong demand for capital in the market and the successful raising of $500 million in new debt, highlighting the company's competitive advantage in accessing capital [11][54] - The YPF case is progressing, with a tentative oral argument date set for October, indicating forward momentum despite the complexities of litigation [12][53] Other Important Information - The company reported a significant increase in cash and liquidity, with $440 million in cash at the end of the quarter, excluding recent debt issuance [42] - Management noted that expenses have increased due to variable noncash drivers related to compensation, but overall expenses remain stable compared to previous periods [44][46] Q&A Session Summary Question: Update on YPF case timing - Management explained the two-part procedure regarding the appeal and stay order, indicating that the Second Circuit is expected to decide on the stay order quickly, but the timeline for the appeal remains uncertain [56][60] Question: Contribution of other cases to fair value gains - Management stated that fair value gains were not solely from YPF, with multiple cases contributing to the overall performance, although specific details on individual cases were not disclosed [64][66] Question: Growth opportunities in specific industries or geographies - Management highlighted a broad and diversified pipeline, with ongoing expansion in various markets, including recent additions in Korea and Spain [88][91] Question: Future opportunities in legal tech and law firm equity - The company is actively reviewing potential opportunities in legal tech and law firm equity, with small amounts of capital already deployed in these sectors [88][91] Question: Economics of adjudication versus settlement - Management clarified that clients may accept lower settlements to eliminate the risk of trial, which explains the difference in economics between adjudication and settlement outcomes [94]

Company Overview - Burford is the world's largest capital provider of litigation finance and holds a dominant position in the rapidly growing litigation finance sector [1] - The company benefits from an established business model, a proven track record, and a promising total addressable market (TAM) [1] Investment Philosophy - The focus is on analyzing high-quality growth companies with sustainable competitive advantages and expanding market opportunities, particularly identifying emerging growth stories before they gain widespread attention [1] - Expertise has been developed in turnaround situations and contrarian investments, targeting fundamentally sound companies that are undervalued due to temporary challenges or market pessimism [1] - There is a commitment to providing insights on broader market conditions, macroeconomic trends, and sector rotations [1] Educational Background - The analytical skills are supported by an educational background from the University of Virginia, which includes rigorous coursework and practical application [1] - Real-world investing experience over four years emphasizes the importance of disciplined research, risk management, and a long-term perspective [1] Contribution to Investment Community - The goal is to share well-researched investment ideas and market insights with fellow investors, contributing valuable analysis to aid informed decision-making across various investment opportunities [1]