Since the 2019 Muddy Waters short report, we’ve been following Burford Capital (BUR) very closely as personal shareholders and have also published various pieces of content on the company:
We’ve explored all the reasons why we believe BUR is unique; the uncorrelated returns of legal assets, asymmetric return profile relative to other alts, the durability of BUR returns as the market leader, and the long growth runway for legal finance market.
However, one important thing we haven’t discussed is BUR’s largest case which amounts to ~50% of current book value: the expropriation of YPF by the Argentinian government.
The case started in April 2015 and in two weeks, on June 23rd, both parties will present final arguments and receive a summary judgment. We interviewed an Argentinian political and capital markets advisor to explore the history of the case to inform our estimation of BUR’s valuation in various scenarios for the conclusion of YPF.
It’s worth reading the interview in full for more context but in short, the Argentinian government privatized YPF, an Argentinian energy company, without abiding YPF’s Bylaws and launching a tender offer for all listed shares. This left Petersen and Eton Park, the two parties that Burford financed, without compensation for the US-listed shares they held in YPF.
On the surface, it seems that this case should be a simple breach of contract upon the change of control, especially as there is clear evidence that the government outright refused to pay for the expropriated shares:
As a matter of fact, we have Argentine politicians going to congress, saying on TV that we are not going to launch a tender offer because we don't want to pay those “stupid banks overseas”. They actually said that, that's the word they used and plaintiffs used those words in the case - In Practise Interview
This document may not be reproduced, distributed, or transmitted in any form or by any means including resale of any part, unauthorised distribution to a third party or other electronic methods, without the prior written permission of IP 1 Ltd.
IP 1 Ltd, trading as In Practise (herein referred to as "IP") is a company registered in England and Wales and is not a registered investment advisor or broker-dealer, and is not licensed nor qualified to provide investment advice.
In Practise reserves all copyright, intellectual and other property rights in the Content. The information published in this transcript (“Content”) is for information purposes only and should not be used as the sole basis for making any investment decision. Information provided by IP is to be used as an educational tool and nothing in this Content shall be construed as an offer, recommendation or solicitation regarding any financial product, service or management of investments or securities.
© 2023 IP 1 Ltd. All rights reserved.
Subscribe to access hundreds of interviews and primary research