Shares in Burford Capital Limited (LSE:BUR) soared 27% after a US District Court found Argentina liable for failing to make a tender offer for their shares in majority state-owned Argentinian energy company YPF (NYSE:YPF) SA.
The London-based litigation finance, risk management and asset recovery company, said that the court decided that Argentina is liable to Petersen Energia Inversora SA and Eton Park Capital Management for not making a tender offer for their shares in YPF in 2012, and that YPF was not liable for not enforcing bylaws against Argentina.
The claims related to Argentine government-controlled energy company YPF, of which a majority of 51% was renationalised in 2012 after having conducted an initial public offering.
Burford explained: "In other words, the ruling was a complete win against Argentina with respect to liability, with the quantum of what we expect to be substantial damages yet to be determined, and a loss against YPF. However, no additional damages would have been payable had YPF also been found liable."
Peel Hunt said while damages have yet to be decided they realistically look to be US$2.0-3.2bn (Burford’s share), with interest potentially adding up to a further US$2.6bn.
The broker said “this win is a big support for Burford’s investment case, helping to prove out its IRRs and its credibility.”
“Whilst we think investors should ascribe more than just book value to the shares, this will do as a first step, and still provides attractive upside for this non-correlated business,” it added.
The broker has upped its price target to 1,270p from 1,000p and reiterated a buy rating.