Some of the biggest cases in Big Law are creating a boom at Burford Capital Ltd., where investors are reaping the benefits from a soaring stock price.
That is one takeaway from the financial results reported Wednesday by the world’s largest litigation finance firm, which saw its share price surge nearly 30 percent in intraday trading. In two years, Burford’s shares have risen more than 500 percent.
Last year the financier’s income from investments in litigation rose 127 percent, to $318 million. That helped Burford’s net profit after tax jump 130 percent, to $265 million.
Burford’s management said it was poised to continue its stellar growth streak. In January, the firm disclosed that it had committed $1.34 billion to new investments, up from $378 million in 2016. In the first two months of this year, Burford said it committed $128.5 million to 12 new investments. By this time in 2016, the firm had made just a lone, $1 million investment.
Burford, whose shares trade on the London Stock Exchange’s AIM market, has now generated $773 million 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 Am Law 100 firms. Last year, Burford said it worked with 70 percent of the top 100 firms in the U.S. 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 percent of those cases, and more than 30 partners at that firm are involved in the work. Molot described that firm 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 $100 million. The average size of its commitments has steadily increased, rising last year to $24 million, compared with $11 million in 2015 and $3 million 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 $726 million to portfolio deals, while just $72 million 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 Inc., 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.”
Bogart said the numbers reflected in his firm’s annual report are “across-the-board” records. But he added there is “significant room for growth,” especially with acceptance of the litigation funding model on the rise among large law firms and their partners.