Burford Capital Founders’ Shares Soar $70 Million in Single Day

Welcome back to the Big Law Business column. I’m Roy Strom, and I’m back to write about the changing legal marketplace after a month break to spend time with my newborn. Today, we look at how a single court ruling bolstered the personal fortunes of two lawyers—plus some Big Law-Masters coverage. Sign up to receive this column in your Inbox on Thursday mornings.

Jonathan Molot wrote a research paper in 2009 that outlined what he saw as an opportunity to create a “market in litigation risk.”

“I am proposing a regime under which lawyers would team up with capital providers to price and absorb litigation risk from corporate defendants after a litigation-triggering event has occurred and a lawsuit has been filed,” Molot wrote.

The “regime” is now a reality that’s made Molot one of the country’s wealthiest lawyers.

How many others have seen their wealth jump by roughly $35 million in a single day?

That’s what happened on Friday when shares of litigation funder Burford Capital Ltd. spiked roughly 60% following the release of a single court ruling.

Molot, a Georgetown University Law Center professor, co-founded Burford in 2009 with Christopher Bogart, who had worked at Wall Street’s Cravath Swaine & Moore and served as general counsel for Time Warner Inc.

The pair each own more than 9 million shares in the company. When trading closed Thursday, their holdings were valued around $70 million apiece. By Friday’s close, they had gained each about $35 million in value.

By the middle of this week, the value of Molot’s shares had settled around $114 million, while Bogart’s reached $107 million.

The ruling came in a long-running lawsuit seeking to force Argentina to repay shareholders of oil company YPF SA who alleged they were burned by its 2012 nationalization. Burford financed claims brought by a minority shareholder, Petersen Energia Inversora S.A.U., which fell into insolvency following the nationalization.

A federal judge in New York last week ruled the country was liable for the damages the nationalization caused.

The judge did not specify those damages, but Burford’s experts say it could cost the South American country more than $7 billion before interest. Any payment is likely months or years away as appeals can still occur.

There are also questions about Argentina’s ability to pay. The heavily indebted country is fighting severe inflation and is receiving funds from an International Monetary Fund program.

Investors nevertheless were bolstered by the ruling, sending Molot and Bogart’s holdings up more than $40 million. (The pair own additional, unvested shares worth around $9 million each, public documents show.)

While those are only paper gains, the duo made real fortunes in 2018 when they sold about a third of the Burford shares they held at the time. That sale, according to Burford’s publicly filed documents, generated about 60 million pounds apiece—worth more than $80 million at the time.

The ruling also provides some validation for the Burford executives in their battle with shortseller Carson Block. His firm, Muddy Waters, in 2019 took aim at Burford’s accounting, including its valuation of the Petersen claim, sending the company’s shares down more than 50%.

Bogart went on CNBC following the report and was asked how the value of Burford’s Petersen claim could rise so quickly to $1 billion.

Bogart responded that the US Supreme Court’s decision in 2018 not to take up the case boosted “the valuation that sophisticated institutional investors are willing to put on an asset like that.”

It’s the type of thing Molot predicted in his research paper more than two decades ago. And it’s now making real changes to Molot and Bogart’s fortune.

How Big Law Colored Fred Ridley’s View on Golf’s Biggest Feud

Golf fans this week will watch Augusta National Chairman Fred Ridley preside over another green jacket ceremony for the Masters champion. Astute Big Law Business readers know Ridley is also a partner at Foley & Lardner.

They also know it’s my annual tradition to stretch golf analogies to fit Big Law narratives. Well, this year Ridley did the work for me.

Ridley was asked during his pre-Masters press conference about a statement he put out in December.

He said at the time that previously eligible players who had defected the PGA Tour for the Saudi-funded LIV Tour would remain able to compete at Augusta National. He added that the players’ decision to leave the PGA Tour “divided men’s professional golf by diminishing the virtues of the game and the meaningful legacies of those who built it.”

On Wednesday, Ridley told reporters his experience in Big Law colored his view of the golf dispute.

“The platform these players have built their careers on was based on the blood, sweat and tears of their predecessors,” he said. “People like Ben Hogan and Arnold Palmer, Jack Nicklaus, Tom Watson, Tiger Woods.”

“I have the privilege of being a partner in a law firm that’s 180 years old, and we exist today because of many generations of lawyers who thought it was important to leave our organization better than they found it,” Ridley continued. “This is just my personal opinion, it doesn’t mean that everyone has to think this way. My comment in December was really more that I was expressing some disappointment that these players were taking the platform that had been given to them—that they’d rightly earned success on, by the way—and moving to another opportunity, perhaps not thinking about who might come behind them.”

I wonder how Ridley feels about Big Law’s free agent era.

Worth Your Time

On Big Law Layoffs: Kirkland & Ellis let go of associates across offices, Meghan Tribe reports. And Silicon Valley firm Gunderson Dettmer has done another round of layoffs, Meghan reports.

On SPAC Suits: Stanford Law professor Michael Klausner is involved in another Delaware Chancery Court challenge to a SPAC merger, Mike Leonard reports. This time, he and lawyers at Grant & Eisenhofer are taking on a blank-check merger by Lottery.com Inc. The suits, using a theory pioneered by the self-described “obscure academic,” have had early success in at least two other cases.

On Crypto Law: Fenwick & West is facing federal law enforcement subpoenas and a class-action lawsuit tied to the failed crypto exchange FTX, which it represented in the run-up to its collapse, Sam Skolnik and Justin Wise report.

That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.