Listed third-party funder heads for closure after stopping new investments

AIM: broker advisers investors to buy

AIM: broker advisers investors to buy

AIM-listed third-party litigation funder Juridica – whose share price has fallen by two-thirds over the past year in the light of some adverse rulings – has put itself into run-off, citing a lack of scale.

It will not make any new investments, but will provide more funding for existing investments where it is “reasonably required to realise shareholder value”.

The company “will seek to return capital to shareholders in the most appropriate manner, following the completion of investments”, and has begun a review to reduce its cost and fees while this happens.

It does not intend to dispose of assets ahead of their “reasonably expected maturity”, nor will it result in the liquidation of the company “in the immediate future”.

In a note published today, Juridica’s joint broker, Peel Hunt, said it could take “some years” for the portfolio to mature.

With an interim dividend of 5p per share also announced today, Juridica has so far returned 64p to shareholders over the life of the company, which was admitted to AIM in December 2007.

Lord Brennan QC, chairman of Juridica, said: “Both the board of Juridica and its investment manager acknowledge that scale and diversity are now required in order to invest successfully in this asset class, which is not achievable under the company’s existing structure.”

Trading at 150p a year ago, it began today at 51p, although the announcement has pushed it up to around 56p.

Juridica mainly invests in US cases. Earlier this week, Juridica told investors that a dispute over the theft of a trade secret had achieved a full win on liability, only for the jury to award a low level of damages that would see Juridica receive $2m. This compared with an original investment of $3.5m and the case valuation of $9.4m in the net asset value (NAV) at 30 June 2015. An appeal is being considered.

In June, the partial failure of an antitrust case in the US reduced Juridica’s NAV by $30m, knocking 10% of its share price.

Peel Hunt said: “Going forward we would expect dividends to be paid as and when cases crystallise into cash, subject to size and timing issues. Legal cases are unpredictable and it is difficult to take a portfolio approach when two anti-trust and competition cases account for 35% of fair value.

“To complete the bulk of cases could easily take one or two years in our view. The last two NAV moves included downward revisions to overall fair value, adding to investor uncertainty.”

Advising investors to buy Juridica shares, it put a target price on them of 70p. Soon after, RBS’s pension fund increased its shareholding substantially to nearly 10% of the company.

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