RE: IC1 Feb 2019 12:29
LITIGATION CAPITAL
MANAGEMENT (LIT)
Aim: Share price: 78p
Bid-offer spread:75-78p
Market value: £84.9m
Website: lcmfinance.com
Sydney-headquartered Litigation
Capital Management (LIT), a leading
provider of litigation financing
to enable third parties to pursue and
recover funds from legal claims, listed
its shares on Aim just before Christmas
2018 when equity markets were falling
out of bed. However, the company had
strong support from investors, who backed
a £20m placing (£18.1m net of expenses) of 38m
shares at 52p each. That was a bargain entry point at
the market low, but there is still scope for the rerating
since then to gather pace.
Importantly, all of the proceeds from the equity
raise were kept by the company, and there was no
selling by existing shareholders. Funds managed
by asset managers Miton Group, River & Mercantile
and Standard Life Investments acquired 30m of the
placing shares to give them a 27.6 per cent stake in
the company. Litigation Capital also raised A$10m
(£5.6m) from investors in Australia in October prior
to cancelling its listing on the Australian Stock
Exchange (ASX) when it moved to Aim. The company
had previously listed its shares on the ASX in 2016
when it raised A$15m on admission.
A growing alternative investment class
It’s easy to see why both UK and Australian investors
have been willing to back a company that is a mini
version of market leader Burford Capital (BUR),
shares in which have risen 12-fold since I spotted the
company’s potential in the summer of 2015 (‘Legal
eagles’, 8 June 2015). In a nutshell, litigation financing
involves the funding of third parties’ legal claims
in exchange for receiving a share of any amounts
recovered from those claims. It’s a growing alternative
asset class with returns determined by the skill of
selecting and managing profitable litigation projects.
Indeed, over the past decade, there has been significant
growth of the industry and expansion beyond
insolvency claims to commercial claims, class
actions and international arbitration in an increasing
number of jurisdictions.
Company background
and trading history
Founded in Australia in 1998, and led by chief executive
and 6.8 per cent shareholder Patrick Maloney
since 2013 – the board of directors hold 9.1 per cent
of the issued share capital between them – Litigation
Capital has experienced significant growth in recent
years. In the seven financial years to 30 June 2018, the
company generated a cumulative return on invested
capital of 138 per cent, and posted an eye-catching
portfolio IRR of 83 per cent.
Around 88 per cent of litigation projects the company
backed were profitable in the seven-year period,
with the average time from investment to settlement
of a litigation case only 27 months, a relatively short
holding period. Moreover, momentum is building
as Litigation Capital delivered its strongest
returns ever in the financial year to 30
June 2018, pos
Sign In
Follow the stocks
