BUR - Burford Capital stock surges after client wins liability ruling against Argentina

2023-03-31 13:28:10 ET

Burford Capital ( NYSE: BUR ) stock soared 60% in Friday early afternoon trading after a decision was made in a decades-long legal case, in which the firm holds a stake to any settlement. Burford's client, The Petersen Group, sued Argentina and energy company YPF ( NYSE: YPF ) in 2015, after the country re-nationalized YPF. On Friday, U.S. District Court judge granted the plaintiffs' claims on liability against Argentina.

Burford ( BUR ) provides litigation financing to corporations and lawfirms. Put simply, it advances its clients the cost of litigation in exchange for a share in successful settlements.

In this case, The Petersen Group bought shares of Argentine government-controlled energy company YPF in an initial public offering. At the time, Petersen was promised that it would be repaid fair value if the energy company was re-nationalized. When Argentina expropriated a controlling stake in YPF, the share value fell sharply, causing Petersen, the largest minority shareholder, to become insolvent, Burford said.

On Friday, a U.S. District Court judge granted the plaintiffs' motions on liability against Argentina but denied motions as to damages, saying that should be resolved at trial, according to the decision. The judge granted a request by YPF to dismiss the claims against the company.

Argentina's motion for summary judgment was granted and the plaintiffs' claim for breach of the duty of good faith and fair dealing was denied.

Burford's ( BUR ) investment in the case dates to 2014, when it made an investment of less than $50M in the case. After favorable case milestones in 2017, the company increased the carrying value of its interest in the YPF case, said SA contributor Weighing Machine . Burford has sold a portion of its interest in the case to investors for more than $200M.

Weighing Machine expects that Burford ( BUR ) shareholders could receive a sizable special dividend from a settlement.

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