Burford Capital Limited (BUR)

[TheMotorcycleBoy]

Sorry I haven't read the thread but maybe this will be of assistance. I sold my BUR bonds above par recently. I am not buying them back. Looking at the governance arrangements below I was foolish to buy them in the first place and also fortunate with the timing of the last tranche I sold.

1. 4 accountants in 4 years
2. no no-exec directors
3. wife of CEO is FD
4. FD is not a qualified accountant (as she doesn't put her qualification initials in any RNS). She is however an FCA. To a casual observer maybe this looks like Fellow of Chartered Accoutants or something but no. CFA is a "Chartered Financial Analyst" which is nothing to do with being an accoutant.
5. The company refuses to move to the main market
6. The company remains comfortable without a qualified accountant at the helm.

Thanks for this Gan,

It's a useful set of criteria - and I should review my other AIMs in respect of these.

Regards point 2. "no no-exec directors" how many non-execs dirs should firms have? i.e. in general and in AIM.

And point 5. "refuses to move to the main market", how did you assess that? Was it purely based on their market capitalisation being greater than many of the firms in the FTSE 350 and so on?

Note that the substance is inaccurate as noted earlier in the thread. The criteria might well stand though. Burford claim that all four existing directors are non Execs

Thanks Dod,

But isn't the point that there should a mix of exec and non-exec directors? I don't quite get it I must admit. Is the difference that the non-execs don't get actively involving in day to day business affairs, but merely turn up for meetings and keep a critical eye on the firm?

To some extent the 'refuses to move to the main market' has been overtaken by their recent press release where they point out that in certain circumstances they may consider a move to the main market.

Dod

So would someone like me gauge an AIM firm's refusal to move to the main market? Would it just be that they have had a Mark Cap higher than the lowest in the least capitalised main market?

Sorry so many questions, which ones are the "main markets", is it all the FTSE markets except the AIM one? i.e. the 100, 250, small cap, fledgeling etc.?

thanks again
Matt

[Gan020]

So would someone like me gauge an AIM firm's refusal to move to the main market? Would it just be that they have had a Mark Cap higher than the lowest in the least capitalised main market?

Sorry so many questions, which ones are the "main markets", is it all the FTSE markets except the AIM one? i.e. the 100, 250, small cap, fledgeling etc.?

thanks again
Matt

Moving to the main market (which is FTSE100, FTSE250, FTSE Small Cap or FTSE Fledgling) is a choice made by the company. It has no relevance to the market cap. When companies start to gain a market cap around vaguely £500m+ you will start to see the main shareholders encourage them to move from AIM to the main market. There are no hard and fast rules about about when this happens but it depends on who the main shareholders are and sometimes the industry and whether the company may need to raise capital in the future. The main markets require higher governance standards. Sometimes perfectly good companies who have market caps higher than this stay on AIM forever.

Burford had the highest market cap of any company on AIM at 1500p and would have been ranked 125th on the FTSE at that time.

It makes no sense to me that in earlier comms they said they had no plans to move to the main market as it would have made access to capital far easier.


Overnight I have reflected on whether now that the governance arrangements are being cleared up whether the bonds would now be safe/good value for me to invest it. I have concluded not on the basis that good company management would have resolved these problems without being forced to by a share price drop/their shareholder base. In addition the Chair makes it clear the management are not in agreement with some of the decisions they have been asked to undertake re governance but yet will do so as they have listened to their shareholders. Feels uncomfortable to me.

[Dod101]

Matt

Most companies have a mix of execs and non execs but there is an argument that the Board should only be non execs because the whole point of the Board is that it is supposed to be overseeing what the CEO for example is doing and to be able to question that impartially. Having the CEO on the Board rather blurs that line because he is then poacher and gamekeeper at the same time. If the Board is made up of only non execs they can still call in the CEO if they want to question him about how things are going.

With investment trusts the Board is nearly always made up only of the non execs, because of course they usually outsource the management, and Board meetings will be to monitor and examine how well the manager is doing.

On the other issue, the main market as I understand it is usually the main Board of the LSE itself. Someone better versed than I am will hopefully provide chapter and verse, but I have always taken it that the AIM market is to give small startups relief from some of the quite onerous reporting requirements of the Main Board. Others here have argued that that is not the case but there is a difference between accounting standards and disclosures re governance, remuneration reports and the rest that the LSE will require so I think that the reluctance of Burford to be listed on the Main LSE Board is to do with reporting standards.

Hope that helps but I am no expert in this area.

Dod

[FurtimNatura]

Muddy Waters posted another report today..

https://www.muddywatersresearch.com/res ... deception/

[TheMotorcycleBoy]

This is behind the FTs paywall, but deleting your browser's FT cookies, and googling with ft burford investors alone will find it:

Yet the selling was not only driven by rattled retail investors: Burford’s largest institutional bondholder — Swiss asset manager GAM — also liquidated its entire position last week.

Filings from the end of 2018 put GAM’s position in the sterling and dollar bonds at more than £80m. After Muddy Waters’ scathing report, however, it dumped its entire position.

The incident suggests that it is not just retail investors that are struggling to get their heads around Burford’s hard-to-value assets. One distressed debt specialist said he passed on buying the bonds at deep discounts given the difficulty in valuing Burford’s book of litigation claims.

“I’m happy for GAM to hang on to [the bonds],” he said, speaking before the fund manager had liquidated its entire position. The incident also shines a harsh light on funds such as GAM, which recently endured its own governance scandal. After all, if active managers stampede away in the wake of third-party analysis of existing public information, what value are they really adding?

My view being, that it's not just us PIs not doing enough homework. A lot of professional asset managers fail to, as well. Indeed how exactly did MW crack Burford? I'm guessing they had conversations with ex-accountants, or is it really all there in the ARs waiting for an enquiring reader to discover?

Matt

[PinkDalek]

Sorry so many questions, which ones are the "main markets", is it all the FTSE markets except the AIM one? i.e. the 100, 250, small cap, fledgeling etc.?

A simple way to see which type of Main Listing indices a company is included in would be, for example, here (Aston Martin chosen at random):

https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00BFXZC448GBGBXSTMM.html?lang=en

From there you'll note they have a Listing category - Premium Equity Commercial Companies.

What Burford included in their 15 August 2019 RNS https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/BUR/14191007.html is as follows:

If we determine that there is an insuperable challenge with achieving a US listing, then we intend to pursue a premium listing on the LSE Main Market.

If you'd like to study further, this mere 125 page or so guide is available:

A guide to listing on the London Stock Exchange
https://www.londonstockexchange.com/home/guide-to-listing.pdf

A Premium as against a Standard Listing is described on page 8 etc

[yorkshirelad1]

Today's IC (Fri 16 Aug) has plenty to digest on Burford ....
p.6 Editor
p. 11 News Spotligh: Burford still in the dock
p. 13: Bearbull: Against the flow

https://www.investorschronicle.co.uk/
(No connection with the IC other than as a reader)

[PinkDalek]

Written in haste but if of any interest.

So [how?] would someone like me gauge an AIM firm's refusal to move to the main market?

... When companies start to gain a market cap around vaguely £500m+ you will start to see the main shareholders encourage them to move from AIM to the main market. ...

There are many AIM companies where such a move would not, under present legislation***, be beneficial to private investors. I'm talking here about those companies where shareholders hope to benefit from IHT Business Property Relief. AIM shares for these purposes are treated as unquoted.

For example, YOUNG & CO'S BREWERY PLC (the capitals are from here https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB00B2NDK765GBGBXAMSM.html) moved from a Main Listing to AIM back in 2005 or thereabouts. I recall seeing at the time they were quite open as to the potential IHT benefits of such a move.

In so far as Burford Capital Limited are concerned, there has long been a question mark as to whether or not a holding in them would qualify. They touch upon it in their FAQs here:

DO THE SHARES OF BURFORD CAPITAL QUALIFY FOR UK BUSINESS PROPERTY RELIEF? (about half way down)

https://www.burfordcapital.com/investors/investor-resources/investor-faqs/

For my purposes, I have taken the simplistic view that they wouldn't qualify due to the nature of the business but this isn't the place to go into BPR in any detail. If they move to a Main listing or end up being treated as no longer being treated as Unquoted on another recognised Stock Exchange elsewhere then the situation changes anyway.


*** I wrote about the Office of Tax Simplification Inheritance Tax Review suggestions over at Taxes https://www.lemonfool.co.uk/viewtopic.php?p=234444#p234444

[GSVsowhat]

[quote="yorkshirelad1"]Today's IC (Fri 16 Aug) has plenty to digest on Burford ....
p.6 Editor
p. 11 News Spotligh: Burford still in the dock
p. 13: Bearbull: Against the flow

(

The Bearbull table analysing operating profit v operating cashflow is instructive and at the heart of Muddy Waters, and the whole article clear and incisive - and balanced re the risks.

Also not sure if anyone mentioned before but there was another vehicle like this in recent years - Juridica Investments - which wound itself up when some of the cases it took on did not win and the previously booked profits had to be unwound.

[PinkDalek]

For those who are not Subscribers, the Investors Chronicle article dated August 14, 2019 is here https://www.investorschronicle.co.uk/shares/2019/08/14/burford-still-in-the-dock/ but best to use 'Burford still in the dock' via search to find it in the cache.

Similarly 'Against the flow Mr Bearbull' should find the other article.

[Alaric]

Also not sure if anyone mentioned before but there was another vehicle like this in recent years - Juridica Investments - which wound itself up when some of the cases it took on did not win and the previously booked profits had to be unwound.

Looking at the Report and Accounts for Juridica earlier in its lifetime, its business model seems reasonably clear and it documented how its cases were progressing. It also appeared to have adopted a policy of distributing favourable settlements as dividends, rather than as in Burford's case seemingly reinvesting them in new cases.

http://www.juridicainvestments.com/~/me ... r-2012.pdf?

[TheMotorcycleBoy]

and https://www.muddywatersresearch.com/research/bur/mw-is-short/ etc.

Quoting one of your earlier posts, PD.

So I've downloaded MW's analysis dossier along with several of Burford's ARs. Now whilst I can clearly understand the numbers and words, for example , from page 6.

BUR first disclosed Napo as a “Concluded Investment” in its 2013 Annual Report, and claimed a total recovered of $15.8 million on a $7.4 million investment, which was purportedly a 113% ROIC. 11 However, the case had not yet concluded. It reached a jury verdict in 2014, and BUR’s client, Napo, actually lost the trial when the jury returned a verdict in favor of Salix. [12]

[12]
https://www.cov.com/files/Uploads/Docum ... o_Drug.pdf *

And then the tabular elaboration, one paragraph down, i.e.

Investments made in 2011* - 53% complete      7.4         15.8     113%    104% (the Napo case)

But what I can't get my head around is how MW has mentioned (unless they are a fraud!!) to link numbers from ARs to actual legal cases with names of firms. So the Napo case apparently is "of 2011 vintage", but the word Napo does not come up in a text search of their AR 2011, in fact it contains no case names at all. I hadn't really expected it to either. (I also had a quick look in the RNSs for those years....).

So I really don't understand where the likes of MW get this kind of advantage. They can only have access to Burford's CCI surely? Thus I don't really quite as beat up for not doing my due diligence properly, since the information is either very well hidden, or not on the public domain at all.

Matt

* And the Salix vs Napo document neither mentions Burford.

[TheMotorcycleBoy]

I filled in a name and email in the e-form rendered here:

https://www.burfordcapital.com/investor ... ment-data/

then got a link-to-PDF. No case names however, so still clueless as to how MW did it.

Matt

[Alaric]

No case names however, so still clueless as to how MW did it.

Even in the USA, there's surely only a limited number of high value law suits. Trial and error might do it. Rumours and whispers as well perhaps.

[TheMotorcycleBoy]

No case names however, so still clueless as to how MW did it.

Even in the USA, there's surely only a limited number of high value law suits. Trial and error might do it. Rumours and whispers as well perhaps.

But if you read the "MW is short BUR" pdf you'll note that it's chock full of numbers from publicly stated Burford accounts, and Carson links these to names and dates more than 6 years in the past. C then publishes, so his words *could* be used against him in court.

If you were Carson, wouldn't you want more than rumours?

Interestingly, Carson also rips chunks out of Invesco +Woodford. Reckons they've bailed BUR out in the past, and turned blind eye to lack of honest disclosures. Really makes me suspicious of fund managers.

I dont know how C learnt all this without CCI. I'd recommend people grab that MW pdf and BUR AR2011,2013 and ask themselves how did C do this now. Google won't help, publicly the info is buried.

Matt

[TheMotorcycleBoy]

4. FD is not a qualified accountant (as she doesn't put her qualification initials in any RNS). She is however an FCA. To a casual observer maybe this looks like Fellow of Chartered Accoutants or something but no. CFA is a "Chartered Financial Analyst" which is nothing to do with being an accoutant.

6. The company remains comfortable without a qualified accountant at the helm.

Hello again Gan,

I'm reviewing my remaining AIM holdings with regard firstly to them having independent non-execs in the Boards, but also regards the credentials of their CFO. Can you just confirm that he/she must be a "Chartered Accountant?". I'm sure that is the case - but you did throw a couple of different terms+acronyms about in your previous post, so I wanted to ensure that I'm spotting the correct title.

Many thanks
Matt

[Gan020]

4. FD is not a qualified accountant (as she doesn't put her qualification initials in any RNS). She is however an FCA. To a casual observer maybe this looks like Fellow of Chartered Accoutants or something but no. CFA is a "Chartered Financial Analyst" which is nothing to do with being an accoutant.

6. The company remains comfortable without a qualified accountant at the helm.

Hello again Gan,

I'm reviewing my remaining AIM holdings with regard firstly to them having independent non-execs in the Boards, but also regards the credentials of their CFO. Can you just confirm that he/she must be a "Chartered Accountant?". I'm sure that is the case - but you did throw a couple of different terms+acronyms about in your previous post, so I wanted to ensure that I'm spotting the correct title.

Many thanks
Matt

I can confirm the CFO of early last week who was the wife of the founder isn't a qualified accountant.
BUR initally responded this was well known to the market but last week they now have a new CFO. The existing CFO has been moved to a post of Chief Strategy Officer
The RNS is here:
https://www.investegate.co.uk/burford-capital-ltd--bur-/rns/statement-re-governance-changes/201908151538582369J/

[TheMotorcycleBoy]

4. FD is not a qualified accountant (as she doesn't put her qualification initials in any RNS). She is however an FCA. To a casual observer maybe this looks like Fellow of Chartered Accoutants or something but no. CFA is a "Chartered Financial Analyst" which is nothing to do with being an accoutant.

6. The company remains comfortable without a qualified accountant at the helm.

Hello again Gan,

I'm reviewing my remaining AIM holdings with regard firstly to them having independent non-execs in the Boards, but also regards the credentials of their CFO. Can you just confirm that he/she must be a "Chartered Accountant?". I'm sure that is the case - but you did throw a couple of different terms+acronyms about in your previous post, so I wanted to ensure that I'm spotting the correct title.

Many thanks
Matt

I can confirm the CFO of early last week who was the wife of the founder isn't a qualified accountant.
BUR initally responded this was well known to the market but last week they now have a new CFO. The existing CFO has been moved to a post of Chief Strategy Officer
The RNS is here:
https://www.investegate.co.uk/burford-capital-ltd--bur-/rns/statement-re-governance-changes/201908151538582369J/

Hi Gan,

Sorry you missed my point. I was asking you if I should, when reviewing my existing AIM shares, try to ensure that their CFO is a Chartered Accountant.

thanks Matt

PS Like many here, I'm out of BUR. Just reviewing existing investments and my future criteria, to try to minimise the chance of this kind of thing happening to me again.

[Gan020]

[quote="Sorry you missed my point. I was asking you if I should, when reviewing my existing AIM shares, try to ensure that their CFO is a Chartered Accountant.
[/quote]

Hi Matt,

My apologies. I cannot imagine buying shares in any company whether on the main market or the LSE who doesn't have a Chartered Accountant as CFO or FD or whatever title you want for the main finance person responsible to the Board.

I am shocked that any Board will even contemplate running a business without a Chartered Accountant responsible for finance.

It would be interesting to know if there are any other quoted companies doing this. There can't be many (if any!)

[PinkDalek]

I was asking you if I should, when reviewing my existing AIM shares, try to ensure that their CFO is a Chartered Accountant.

I appreciate you are out of Burford but in this case, one of the main board directors from inception is a Member of the Institute of Chartered Accountants in England and Wales..

There are quite a few broadly similar qualifications but maybe that could be the subject of a separate Topic.