Litigation finance no longer appears to be the surefire bet that some investors once thought it was. Burford Capital (BUR) posted a $67.5m (£50m) loss for the first half of 2021, compared with a profit of $187.9m in the same period a year earlier as it recorded a $79m non-cash accrual charge linked to potential employee asset carry plan benefits.
Investment bank Close Brothers (CBG) also recently decided it would withdraw from the market after booking impairment charges against Novitas, a funder of legal cases it bought in 2017. The company said the risk profile of Novitas was “no longer compatible with our long-term strategy and risk appetite”.
Investments are still being made into the sector, though, with both Gateley (GTLY) and Mischon de Reya agreeing partnerships with funders in September. Litigation Capital Management (LIT) is also stepping up activity, having completed a $200m first close of its second fund in October. It is looking to raise a total of $300m, having committed 91 per cent of the capital from its $150m first fund.
Among the cases it agreed to back in 2021 were a claim against Carillion’s former auditor, KPMG, following the outsourcing group’s collapse in 2018, and one brought against French electricals retailer Darty from a liquidator of the former Comet Group business.
Litigation Capital Management’s share price plunged from 104p to 80p on 17 December after it announced that executive vice-chairman Nick Rowles-Davies had been dismissed on gross misconduct charges. The share price subsequently recovered to close up 52 per cent for 2021 at 100p, with chairman Jonathan Moulds and chief executive Patrick Moloney buying the dip. Moulds bought 725,000 shares, bringing his holding to 975,000, or 0.82 per cent of the total. Moloney bought 50,000 shares through ATE Holdings, a wholly-owned Australian entity. This increases the size of his stake to 8.56 per cent
