Burford Capital, the largest publicly traded litigation funder, posted its latest financial results Thursday, offering a rare periodic glimpse inside the opaque industry. Other indicators I'm missing out on? Email me here. Eager to get this dispatch in your inbox every Thursday? Sign up here.

 

Making Sense of Litigation Finance

On Wednesday, I got a call from New Delhi. A young research analyst for a Dublin-based investment firm that manages pension money wanted to ask me some questions about the litigation finance industry.

Globalization at work: an Indian business school grad reaching out to a Philadelphia-based reporter on behalf of his Irish employers to do due diligence about the deployment of capital contributed by pension funds, presumably located across Europe.

He was filled with good questions about the booming industry: What's its ceiling? Is there room for upstarts as well as the more established players? Are hedge funds making their own direct investments into portfolios of litigation?

Most entertaining was his query about funds in which I would consider investing. “I'm a journalist,” I laughed. “Ethics aside, you think I've got the money for that?”

But the inquiry raised a larger point. As new funds pop up like weeds, most are largely opaque. Backed by private capital, they're eager to announce when they've hit fundraising milestones. But where they're putting the money is mostly a mystery. Acknowledging that a litigant is bolstered by outside funding is a tactical blunder that can give a defendant a roadmap to how to outlast the claims.

The funders' own research data helps, to a degree. Chris Bogart, CEO for industry colossus Burford Capital, told investors Thursday that there are good reasons to publicize these findings widely, rather than just rely on the information internally to gain a stronger sense of what's going on in the market.

“It's also so we can publish market research that will help lawyers and other potential capital users realize that they are not doing something that's unusual or esoteric any longer,” he said.

But Bogart was facing the investors because his company is publicly traded, and therefore has no choice but to be periodically forthright about its performance. Thursday was one of those days. Burford lifted the hood on its financial performance for the first half of 2019.

The results were impressive. Income climbed 40% to $287 million and profit after tax rose 36% to $225 million. Investors were less enthusiastic. Shares dropped nearly 7% from the start of trading on the London exchange. Bogart shrugged off the decline, saying the company doesn't put a lot of weight on share price and attributing the dip to long-term investors looking to cash out.

“If you look generally at Burford's share price, there's a decent amount of volatility,” he said.

Indeed, over the last 52 weeks, the spread between the stock's high and low is equivalent to 50 percent of the company's value.

Unfortunately, outsiders don't have many other measuring sticks for Burford. The one other major publicly traded player in the industry, IMF Bentham, is listed on the Australian exchange. The company only releases financial information on a yearly basis, and with the 2018 results posted in late August of last year, we're likely another month away.

The share price doesn't swing quite as vigorously as Burford's however, with a 52-week spread closer to 30% of its current value.

I'll be paying attention in late August. New Delhi and Ireland might want to as well.

In the News

“Law Firm 2.0” seems to have been a losing bet for LeClairRyan, which partnered with UnitedLex last year in the creation of a new legal services platform designed to handle law firms' non-core operations. After the latest round of departures—this time a 15-lawyer aviation team leaving for Fox Rothschild—rumors are swirling about the Richmond, Va.-based firm's potential dissolution. “As a firm, we have not held a vote to do anything definitive at this point,” LeClairRyan president Elizabeth Acee told my colleague Lizzy McLellan in an email Thursday, adding, “We are considering options.” We'll see if anything changes by the time this hits your inboxes.

My colleague Patrick Smith keeps tabs on which law firms are bringing in the big deals. But last Friday, he went in a slightly different direction, looking at tie-ups in the legal innovation arena. Thompson Reuters recently purchased HighQ, and Elevate has recently demonstrated an acquisitive streak. It will be interesting to see if dealmaking slows in the event of a slowdown or whether the cost-cutting promises inherent in these businesses ensures their continued appeal even amid economic uncertainty.

Last week I noted that consultants in the U.K. are taking full advantage of the uncertainties posed by Brexit, at least according to their balance sheets. Unsurprisingly, lawyers are too. The FT reported that partner pay in the Magic Circle rose between £1.6M and £1.8M in the 12 months prior to May, led by Freshfields Bruckhaus Deringer.

Back again next Thursday! What do you want to hear about? Tell me at [email protected]. Sign up here to receive The Law Firm Disrupted as a weekly email.