Member Info for tommy15

I’ve just rewatched the webcast where they discuss this, and they seem very confident that such actions would be unsuccessful. So maybe this is just someone having a punt? Or maybe some precedents have come up that make Manolete’s confident stance in the webcast more doubtful. Impossible to say without an update.

https://www.manolete-partners.com/news/view/webcast-manolete-s-md-mena-halton-talks-with-nti-s-neil-taylor-the-issues-and-solutions-with-paccar

Fomo, is your information suggesting that cases are being reopened, or that cases are being reopened _successfully_?

Thanks again

“ The Board considers that the prospect of any party seeking to re-open a previously completed Funded Case as highly remote”

Fomo I assume you mean this bit?

Thanks FoMo, very interesting.

Mind if I ask how you had this confirmed?

This could go a long way in explaining both the price movement and the delay to the TU

I think "smoke and mirrors" is unfair. The business model is fairly simple: Mano buys a case for £X, does £Y worth of work on the case, and settles the case for £Z(X + Y). The multiple Z is typically 2.5; the typical time taken is 2 years, so the ROI is ~125% - i.e. very good. The limiting factor is the money they have to invest in cases; the fact that income dried up over Covid was bad not because it affected the numbers for those years (although of course it did), but because it had the potential to shift the growth curve backwards by several years. The borrowing from HSBC and the lack of dividend are both plugging this cash gap which they need to invest in new cases and drive the growth train.

If this share isn't for you, I totally get it. It has performed badly for the last few years; there are risks involved (as evidenced that despite the supposedly strong ROI they have yet to really grow); the accounting model is weird; valuations are hard. But in my opinion, the business model is real, the returns are real, and _most of_ the reasons for the poor performance of the last few years are now behind us. (I say most, because it remains to be seen how the interest rates will affect things; apart from anything else investors moving to safer cash is likely to affect the price; that's yet another factor to keep an eye on here!)

Re "impotence". I take your point here, but insolvency litigation is a large market of which Mano has a small portion (in particular, they have a small portion of the CFA portion of the market, which they are trying to tempt to their funded approach). There is plenty of room for them to grow into, so their inability to create a market for their product out of thin air isn't a big concern IMO.

Also, they do have a lever to pull, which is to be less selective in the cases they invest in. They currently proceed with about a third of enquires made of them; they could dial this up higher - this would be equivalent to a producer of a tangible "widget" cutting prices - lower margins, higher volume. Better business model? Not my call to make; the point is that they do have that option.

"1 to 2 shares every day" - I'm no expert on the nitty gritty of the markets, but I imagine this could be people buying/selling into funds that hold a small amount of Mano, where a small purchase/sale of the fund triggers a teeny purchase/sale of Mano? Maybe it's some kid playing with a toy investing account? As I say, selling one or two shares a day in an attempt to inflate the price is empirically not working, and seems like a pretty weak strategy to run that scam, so I'm not too concerned.

Interest rates / discount rates / NPV - yeah I acknowledge that this is the tricky bit. Mano's accounting model is unusual (and I completely understand if people want to avoid it for that reason; I've got my head around it and made my peace with it), which has made traditional valuation systems hard to apply. I think Mano has also been heavily penalized for not growing at the rate that it initially promised, which I believe is mainly due to Covid and the government completely shutting down their business. While rising interest rates affect the NPV calculation, a) this doesn't capture investor sentiment (which I agree has not been a friend of Mano, but that can change), b) who knows what the rates will be a year from now, and c) higher rates are likely to expose more cases of fraud, and be good for Mano's business. Figuring out the overall affect of higher rates is not trivial here.

I should say, an alternative - and IMO more likely - sinister explanation for the recent price movement is that someone knows something we don’t about the upcoming TU and is getting out while they can. I’m surprised that the TU hasn’t been released yet - it’s seems that in most previous years it has come out by now - and that delay combined with the price movement does have me concerned. But then again AIM as a whole is performing badly as PIs move their money into safer cash accounts, and possibly took a hit when Sunak hinted at the removal of IHT. And Mano’s price is levered due to the small free float. So who knows.

If it was me, and I was considering getting in, I’d at least wait until after this update. If it’s good news then you can get in to a promising counctercyclical business at a good price; if it’s bad then you dodged a bullet.

I broadly agree with Hardboy, although at this point I’d settle for less than a 3-4x gain!

In particular, I don’t think there’s anything sinister about the price movements and the sales. If this was 2 actors attempting to prop the price up I think they would have done a better job of it! The much more likely solution is that someone with a large position wants out, there aren’t many buyers, so they are selling it in chunks that the market can (sort of) absorb. To state the obvious: neither a large holder wanting out nor the lack of buyers is good news, so I’m not being rose-tinted here - I just think genuinely poor performance is more likely than fraud in this case.

I’ve written a few times about why this share has failed to be countercyclical as many would expect. The short answer is that it has been buffetted by bad news (the government literally shutting down its entire business during covid being the obvious one) and as hardboy says there is a significant lag between malfeasance happening and Mano reporting a profit.

For me it’s all about this next update. The previous update seemed to signal the turnaround that we’ve been waiting for, with everything pointing in the right direction. The next update will confirm whether this is indeed the case. For me it’s been gut-wrenching to see this share lose 25% of its value in the month running up to what I hope and expect to be a positive update.

Yeah it’s insane. Gotta remember that this is very thinly held, only a fraction of the shares are free float.

I think (hope!) that’s also part of the reason why the recent AIM rout has had an outsized impact here.

Wow there's a lot here, trying to take it all in!

Re potentially busting HSBC covenants - nobody is denying that they had a terrible year, for reasons mostly outside of their control. Doesn't the fact that they _didn't_ bust those covenants mean they played their cards well?

Why is the 2023 report "a disgrace"?

What is the issue with having Lords as non execs?

The zero-cost options vest over 3 years and are awarded pro-rated based on performance. Doesn't seem too terrible?

"The insolvency market is booming so their share price is up" this clearly isn't true, although I wish it was!

Sorry Acearp, I'm not trying to deny anything you're saying, it's just that it's a long post and it's a little unclear to me which parts should be giant red flags vs just not ideal. I'd really appreciate some clarification! Thanks :-)

You know what, on balance I’d rather have him wittering away on some Internet forum than out in the community doing real damage. You’re taking one for the team Oldboy!

Hopefully we'll get a TU early next month.

MANOs multiple has suffered terribly since the early excitement about the potential for high growth and high returns was killed off by COVID (and the large adverse judgement. And the re-valuing of ongoing cases due to the economic situation).

The questions are:

- will the high growth and high returns promises be met once all of these issues have worked their way through the system?

- will there be a steady stream of more issues like this? Is this just the nature of this business? Or have we been unlucky? (e.g. the recent PACCAR judgement - while this doesn't seem to be a massive deal for MANO, I can understand if it made investors more wary about the sector in general)

- even if MANO is due a positive rerating, because the growth story truly is there, how long will it take investors to notice?

I'm excited for the upcoming update because, as far as I can tell, this has been a period of relatively smooth sailing (at last!), and as you say the macro factors are all still in MANO's favour. So maybe - hopefully! - this will be the first step in a turning of the tide.

But there's a long way to go, and sadly it's getting harder and harder to stay optimistic about this one.

Been an awful few weeks for this one, with a big sell going through this morning at the 52-week low. Anyone know what’s going on?

Someone getting out ahead of the prelim results?

Fomo, from the annual report:

“ Realised revenues on completed cases were £26.8m, an increase of 76% (FY22: £15.2m) although FY23 contained an exceptionally large funded case completion of which £4.9m was recorded in realised revenue (total settlement £9.5m) – our second largest ever completed case and one where all the cash was received within just a few weeks of completing the case.”

And

“ 74% of total revenues derived from purchased cases (FY22: 93%) and 26% from funded Cases (FY22: 7%) – the large £9.5m case (£4.9m of which was Manolete's share) referred to earlier was a rare funded case.“

It’s very clear that the unusually high % of revenue from funded cases in 23 was due to this one case, and that this was realised revenue - Mano has already been paid.

Forensic I don’t think that is all that relevant, since only ~5% of Manos cases are funded.

Oldbutnowisa - I was wondering the same thing, but wanted to check myself in case it was just rose-tinted glasses. But yes, it would seem that if some portion of the industry is in turmoil after this ruling, it can only benefit operators who are less affected. It sounds like both Mano and LIT are in this category.

"Over 95% of Manolete's successfully completed cases are completed by way of a consensual settlement agreement with the defendant (often an individual previous company director). Very few end at a trial. The Board considers that the prospect of any party seeking to re-open a previously completed Funded Case as highly remote."

FoMo, isn't this pretty much saying that they think this is OK? (With the caveat that they're still looking into it and may update further)?

Oh lol RNS came out while I was writing that. Guess it's less speculation now!

It's all speculation at this point. Manolete seem to be pretty sharp, and I'm sure they've had good advice and were aware of the possibility of this decision, but that doesn't mean their contracts are bulletproof.

As for clawback and/or future payments at risk - I'm absolutely not an expert, but at this point it seems like the best case scenario is that people will at least _try_ to get some of their money back. Even if they are unsuccessful (or only partially successful) it will be a big distraction for Manolete, lots of legal fees, etc.

A potential silver lining: if this causes turmoil in the funded litigation segment of the industry, could that drive claimants towards Manolete's established purchasing model?

Is that model at risk too??

What rumour? Are you saying the supreme court ruling is a rumour?

The fall in price makes 100% sense given the large dose of uncertainty this adds to Manoletes future.