Burford Capital, a third party litigation funding firm, announced that its stock just gained 29.4 percent in value.
The firm, which makes its money investing in lawsuits, took in £244.3 million ($341.2 million) in revenue last year, according to Shares Magazine, which is about 20 percent more than what was forecast. Burford’s investments reportedly returned 75 percent on invested capital (Shares Magazine says just a 15 percent rate is the sign of a “good quality business”) and 31 percent internally.
According to the article, Burford sent just £715K ($1 million) to new investments in the first two months of last year. This year, the article says the firm has already committed £91.9 million ($128.5 million) in 12 new investments.
Burford also increased its investments in “portfolio financing,” in which the company invests large sums of money in groups of cases, rather than single lawsuits. An American Lawyer article said Burford invested £519.7 million ($726 million) in portfolios, while only £52.9 million ($74 million) in single cases.
The rapid growth of third party litigation funding begs asking why this industry is still not subject to any disclosure rules and meaningful government oversight. The new emphasis on portfolio funding may let some litigation funders take on more questionable cases by spreading their risks across pools of assorted cases, some of which could be frivolous or lacking legal merit.
A research paper from the Institute for Legal Reform proposed many concrete solutions on how third party litigation funding could be regulated in the UK.