Some of the biggest cases in Big Law are creating a boom at Burford Capital, where investors are reaping the benefits from a soaring stock price.
That is one takeaway from the financial results reported on Wednesday (14 March) by the world’s largest litigation finance firm, which saw its share price surge nearly 30% in intraday trading. In two years, Burford’s shares have risen more than 500%.
Last year, the financier’s income from investments in litigation rose 127% to $318m. That helped Burford’s net profit after tax jump 130% to $265m.
Burford’s management said it was poised to continue its stellar growth streak. In January, the firm disclosed that it had committed $1.34bn to new investments, up from $378m in 2016. In the first two months of this year, Burford said it committed $128.5m to 12 new investments. By this time in 2016, the firm had made just a lone $1m investment.
Burford, whose shares trade on the London Stock Exchange’s AIM market, has now generated $773m from concluded cases since its founding in 2009.
“This is not a small dataset. It’s not a fluke,” said Burford’s chief investment officer Jonathan Molot in a Wednesday conference call with investors.
The business is now generating vast amounts of work with top US law firms. Last year, Burford said it worked with 70% of the biggest 100 firms in the US on potential investments. It currently is funding cases handled by 40 firms.
Burford’s portfolio of cases now numbers 877 in more than 30 jurisdictions, the firm said. Its largest relationship with a law firm, which Burford has declined to name, comprises 14% of those cases, and more than 30 partners at that firm are involved in the work. Molot described that firm on Wednesday as “a global, enormous firm”.
Management said that half of the cases that law firms reached out to Burford with interest in financing were valued by claimants at more than $100m. The average size of its commitments has steadily increased, rising last year to $24m, compared with $11m in 2015 and $3m in 2013.
While litigation funding began and still continues to involve funding for one-off cases, Burford has increasingly turned to what it calls “portfolio financing”, where it provides a law firm a large chunk of money in exchange for returns tied to a pool of cases.
That type of financing has come to dominate Burford’s business. Last year, the firm committed $726m to portfolio deals, while just $72m went to single cases.
Burford’s CEO Christopher Bogart, a former litigation associate at Cravath Swaine & Moore who once served as general counsel for Time Warner, said in a Wednesday conference call that law firms often start their relationship with Burford via one-off cases before committing a larger portion of their litigation to funding.
“What law firms have learned is [by] taking our financing and the portfolio facility, they can then offer clients true alternative billing arrangements,” Bogart said. “It has become a business development tool for lawyers.”