Image source: Getty Images
Burford Capital (LSE:BUR) shares surged by as much as 20% on Tuesday (1 July). This was driven by two major developments that have lifted clouds of uncertainty and reignited investor optimism in the litigation finance specialist.
US threat lifted
The first catalyst for Burford’s rally was a significant legislative reprieve in the US. For weeks, investors had been on edge over proposed tax changes targeting litigation finance, which could have undermined Burford’s core business model.
The US Senate parliamentarian has now ruled that these tax changes cannot be included in the latest budget reconciliation bill. This effectively removes the immediate threat to Burford’s operations.
The company released the following note on Monday: “In revisions to the bill over the weekend, the proposed tax rate has been reduced to 31.8% (instead of 40.8%) and the withholding tax rate has been reduced to 15.9% of gains (instead of 50% of the tax rate applied to gross proceeds).”
Victory in Argentina-YPF case
Separately, Burford scored a legal victory in its long-running battle over Argentina’s 2012 expropriation of YPF, the country’s largest oil company. A US court has ordered Argentina to transfer its 51% stake in YPF into a Bank of New York Mellon account, and subsequently to Petersen and Eton Park. These are funds represented by Burford.
While Argentina is expected to appeal, the order marks a pivotal milestone in enforcing the multibillion-dollar judgment Burford is pursuing. The market is seemingly interpreting this as a concrete step toward monetising a high-profile asset.
Over the past 18 months, President Javier Milei has refused to negotiate with Burford. However, this latest development has created a $16bn problem he can’t ignore… or likely afford.
Burford’s business model revolves around funding complex legal cases in exchange for a share of any proceeds. Wins like the YPF case can result in windfall profits. However, they can be inherently unpredictable.
Valuation conundrum
The sharp share price move has also put Burford’s valuation in the spotlight. As of July 2025, the company’s forward price-to-earnings (P/E) ratios for the next three years are as follows:
- 2025: 10 times
- 2026: 8.1 times
- 2027: 5.7 times
Burford’s enterprise value (EV)-to-EBIT ratio is also projected to fall from 10.5 times in 2024 to 6.2 times by 2027, reinforcing the narrative of improving profitability and operational leverage. However, the company’s net debt is fairly sizeable at around $1.2bn, although this only represents around 20% of tangible assets.
The bottom line
Analysts are bullish on Burford with five Buy ratings and no Holds or Sells. What’s more, the average share price target is 38% above the current share price. However, it’s worth noting that institutional analysts can get things wrong. In fact, Wall Street analysts have underperformed the US market over the past five years. That’s pretty shocking.
Nonetheless, Burford certainly demands further attention. Its valuation multiples are enough to attract my interest. However, in all honesty, it’s not a company I know enough about. I think it’s one that I’m going to add to my watchlist for further consideration.
