Burford was a well-known brand in both 2018 and 2019 among UK retail and the buy-side following a strong performance since IPO. This led to its valuation being “priced for perfection” as bullish investor theories—including those from the buy-side—started to circulate. This is an odd paradigm because Burford's earnings can vary significantly over the course of any given year (due to the short-term unpredictability in the timing of case resolution and the binary hazards associated with any tiny subset of case resolution). It's like if I were to determine the P/E value of a hedge fund like Pershing Square while it trades and deals in derivatives and equities.
There are very few things in life that are guaranteed, but betting on a virtually uncorrelated portfolio of results is nice to have when that company is developing a stellar reputation in the sector, a third party capital management business with high performance fees, and is trading below its liquidation value at the same time. As a company, Burford is not in a position to make large-scale investments all at once. A large amount of cash on the balance sheet would not be ideal given the time value of money. Burford's founders actually favoured operating the company with minimal levels of debt (D/E ratios under 0.3).
Given Burford's current pricing, I anticipate that the company will soon sell a portion of the claim and reinvest the proceeds in either its operations, a special dividend to restore its investors' trust following the unfair and protracted Muddy Waters scandal, or a tiny buyback. Argentina will probably agree to pay Burford in installments as well. Both sides might benefit from this. Last but not least, crude oil has performed well in recent years and could help Argentina's ability to pay by possibly include royalties on its oil reserves. There is some risk however, that Argentina will not pay despite having a track record of eventually settling claims.
https://www.sharesmagazine.co.uk/article/burford-capitals-16-billion-court-win-is-not-a-done-deal
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