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

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