Yet Another Value Podcast - Chris DeMuth's State of the Markets July 2023

Episode Date: August 1, 2023

It's time to welcome back Chris DeMuth for his monthly state of the markets. For this July 2023 edition, Chris provides the latest takes on the Activision / Microsoft deal following the judge's ruling, Silicon Motion $SIMO / MaxLinear $MXL deal, Liquidia $LQDA and Burford $BUR. For more information about Rangeley Capital, please visit: http://www.rangeleycapital.com/ Chapters: [0:00] Introduction + Episode sponsor: Stream by Alphasense [1:42] Updated take on Activision / Microsoft deal following the judge's ruling [16:18] Silicon Motion $SIMO / MaxLinear $MXL Deal [28:19] Liquidia $LQDA [33:11] Burford $BUR Today's episode is sponsored by: Stream by Alphasense Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are, and you can access primary research easily and efficiently through their platform. With Stream, you'll have the right insights at your fingertips to make the best investment decisions. They offer a vast library of over 26,000 expert transcripts, powered by AI search technology. Plus, they provide competitive rates on expert call services, and you can even have an experienced buy-side analyst conduct the calls for you. But that's not all. Stream also provides the ability to engage with experts 1-on-1 and get your calls transcribed free-of-charge—all for 40% less than you would pay for 20 calls in a traditional expert network model. So, if you're looking to optimize your research process and increase ROI on investment research spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. Thanks for listening, and we'll catch you next time. For more information: https://www.streamrg.com/

Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are, and you can access primary research easily and efficiently through their platform. With Stream, you'll have the right insights at your fingertips to make the best investment decisions. They offer a vast library of over 26,000 expert transcripts powered by AI search technology. Plus, they provide competitive rates on expert call services, and you can even have an experienced by-side analysts conduct the calls for you.

But that's not all. Stream also provides the ability to engage with experts one-on-one and get your calls transcribed free of charge, all for 40% less than you would pay for 20 calls and a traditional expert network model. So if you're looking to optimize your research process and increase ROI on investment research spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. Thanks for listening and we'll catch you next time. Hello and welcome to the yet another value podcast.

I'm your host, Andrew Walker. If you like this podcast, it would mean a lot. If you could rate, subscribe, review wherever you're watching or listening to it. With me today, I'm happy to have on my friend and Rangley Capital's founder for his monthly state of the markets. Chris, the Muth. Chris, how's it going? Going well, Andrew.

Welcome home and nice to see you. Thanks. I don't know if you heard the Hollow, but I was just in Amsterdam for those who don't know. And I loved it over there. I picked up the Hollow. My wife laughed at me every time I do it. Chris, we've got a lot to talk about. Before we get there, quick disclaimer, nothing on this podcast is investing advice.

That's true for every podcast we do, but particularly true for this one. just because you and I are going to go through a bunch of situations. Who knows where this conversation will take us. But everyone should just remember, please consults financial advisor. This isn't financial advice. Anyway, Chris, it was, we are talking July 31st, 2023. It was a crazy month. Both of you and I were in Europe.

I was telling Alicia, my wife, I was like, it wasn't as relaxing as a trip because I was there during earning season. And it was just like, Activision, Microsoft, potential MAA E. Clem and Simo, like, all these things were happening. And I was just like, I just need to know what's going on. I need to read. to research. But what is on your mind for the month of July? It's funny. Market and efficiencies tend to be a matter of magnitude and not direction. It's not that common to see something go

up by a lot when it should be going down by a lot or vice versa. But our things have had a couple things in the last times away where I was kind of mercifully away or distracted where something was kind of flailing in one direction and then flailing in the other direction shortly thereafter. And I kind of had the benefit of not having to have or react to hot takes, but at least been, you know, time zone or flight delayed enough to think about it afterwards. Seema is one of them. There were a couple others in that kind of area. So I guess in terms of time, ATVI has taken up most of my time. I listened to every word of the trial, kind of read every, you know, endlessly interested in the antitrust there in the U.S.

in the CMA side, in the dynamics between the two regulators, both because I wanted to get that one right and because I wanted to kind of understand the circumstances that affect other future deals and public policy on the antitrust side. So I don't remember where we last left off in Activision. I know we've spoken about it quite a few times. It's tough because we speak so much, speak an email so much offline. But if I remember correctly, you know, the judge, her, the judge's ruling, say, no, PGI for Activision came after our last podcast. So, you know, our last podcast was in this weird state where he said, hey, is a judge going to basically block this deal, allow it? You, you were saying, hey, if I remember

correctly, you were listening to it. I know you listened to it, but I think we were kind of recording while the trial was so going on. And you were saying, hey, Microsoft is making a really good case here. I don't know how the judge is going to block this deal with every with the smoking guns. They revealed how good their, their lawyers and their executives are doing. So since then, the judges come out and said, no, PGI. The deal, it hit the walk date. I want to talk about the walk date for a second because it was interesting, but you'll hit the walk date. Activision got a little tiny bump and basically we're just waiting if UKCMA can get over the finish line, which it seems like the CMA has done a massive 180 and it will get over

the finish line. This deal is going to close. Yeah. So actually, the only part that I wasn't live was when we recorded, we kind of duped it and I had I had to go back for that one hour. But the judge's decision was magnificent. It was interesting. She didn't miss anything.

It was a very high-quality decision that I thought looked correct, unappealable, and interesting in that to the extent you could parse any kind of partisan or ideological theme from her. She's a Democrat appointee in a traditionally left-wing area, and the government made no progress. It wasn't a close call. I mean, they failed redundantly. I mean, there were a number of points that were necessary but insufficient for the government to make. And they didn't accomplish anything. I mean, for the precedent value of this, it's going to emboldened everybody who, like Microsoft can afford litigation. You know, if you're tiny, you can still bully.

The government is going to still be good at bullying tiny private entities. simply because of the punishment, the process is the punishment, the difficulty of litigating. But if you're big enough to litigate, boy, Microsoft should feel great about their case, about the decision. Not just, yay, we won, yay, make some money good for us, but in the catharsis of living in the world that's analyzable and that if you listened to the case, it'd be rather traumatizing for the topic of analysis to listen to that case and imagine any decision other than what was given. So it feels like, oh, we can do this thing. And in the same time, I listened to all of the CMA. The CMA has been a very difficult process historically to appeal. From the beginning, you and I were saying on this podcast, we think the U.S. side of the

case, we think is a disaster and we think Microsoft would win it. If we could only bet on that, we'd love to bet on Microsoft. Yeah. Our one concern was, hey, if the CMA blocks, we don't know how you get around a CMA block. And the CMA in, if I remember correctly, end of April, did block the deal. And at that, there were rumors that they were going to. And when that happened, you know, I said, it's not really, you can't really appeal the decision. Microsoft appealed kind of the process, but you can't really appeal the decision. We just said, this is where deals go to die. And it seems like they found ways around that. And listening to, so I listened to every word of the, what we would call the appeal at court. the tribunal. And it was, it might not have been great entertainment for somebody who hadn't been following it all the time. It was, I thought, hilariously funny, unbelievably interesting and high drama. If you're familiar with the case, I at this point had just finished an ultramarathon. I was recovering in Lucerne, Switzerland on the banks of Lake Geneva, and I was sitting at a cafe, just like laughing, listening to this, because, one, the judge was unbelievably pedantic, which is always how judges seem to me in situations where I'm like, hey, if you want me to rush,

I think seconds. If you want me to delay, I think, oh, I should sleep on it, decide tomorrow. I don't know what else there is to think about when you've been, assuming you've spent, you know, months and months and months accumulating data. I don't know what one does to improve judgment at this point. But government standards are so different in terms of when they talk about, oh, or expedite this decision will make it two years from now. And I'm like, that's not what the word expediting means. But in this case, the appellate judge was incredibly pedantic about all of the legal

inability of a lower decision to be reversed after it was final, which an enforcement mechanism you can understand. I mean, a cop can't come into a murder trial halfway through and say, hey, I changed my mind. I didn't mean to arrest this guy. You know, you do seed. you're part of the process once it goes beyond you. But it's a little bit absurd substantively when you have a buyer that wants to buy, a seller that wants to sell, a regulator wants to say fine, the bankers that want to finance, like there's no substantive. It was just, it was so weird because you had Microsoft say, hey, we judge, we'd really like you to dismiss the trial next week. And then the CMA, you know, Microsoft's the defendant. The CMA is the plaintiff.

And the CMA would say, Judge, we'd really like you to dismiss the trial this week. In Activevision, I suppose, the seller would say, yes, we'd really like to get this deal done. And the judge said, whoa, whoa, everyone here wants to delay. But I need to make sure this is the right idea. Though I do understand he was worried about the precedent and following the procedures. But it was just funny to have every side say, we want this. And somebody say, let's hold up a second. It's just so foreign to what we do.

You know, if we could argue and disagree substantively for weeks or months. But once we all agree, it's like seconds before we do the thing that we do. there's no like now that we all agree what now like well now you do it and so that was i thought funny uh but then uh it got to the point and then the high comedy i mean this there's a show yes minister about british bureaucracy and this could have been an episode from it where all that had to happen was the cma to basically pull like they just had to admit any kind of oh no this part of the thing we did was like the tribunal guy was handing everybody. here's how we get around it.

We could do it instantly. I mean, he was just guided. I mean, he knew there's absolutely no benefit to any delay other than they needed the precedent value of handling this right way. Fine. But it was just comedic in that you had these bureaucrats that the one thing they wouldn't do is like take back the thing they already said, even though they said the thing I already said, which was like decided and partly incorrectly, would not hold.

up to a subsequent appeal. If we went through this whole totally unnecessary process, it would eventually fail. Okay, we'll take it back. Well, no, we can't take it back. But let me, okay. I want to, so I, this month to me, there was this end of one thing, right? There were some things in the market that we've never seen before. I don't know how much we're going to get a dive into them because I want to go through a lot of things today. But just on active, there was this really interesting day. I think it was July 18th. That was the day the merger agreement was going to expire, right? And it was a really interesting day because we've never seen a day like that before

where it was the last day of the merger contract before you hit the out date. And we had this AAA buyer, right? Microsoft is probably the best buyer in the world. There's no financing risk there. There was only one regulatory body outstanding, the CMA, and the CMA had said they were going to, they were going to, basically they're going to prove it at some point. They just need to follow the process. But you had this really interesting day where the market doesn't know what to do, right?

You've got this deal where there's only one regulator. the regulator is saying, hey, we'd love to approve this deal, but we just need to follow our process. But because the merger contract's about to expire, you could have a bump, you could not have a bump. It was just this really strange day. I've talked about before. I don't quite know how to express it, but I want to ask you one thing on that day.

Activision and Microsoft end up extending the deal in return. They get Activision gets a nice bump in the break fee. They get economic terms if the deal does happen to fall through. And they got to pay a 99 cents per share dividend. And I think a lot of people, maybe me included, thought, hey, Activision kind of had Microsoft up on the ropes after 18 months in this deal and all they've gone to. I know a lot of ARBs who thought the bump could be. I heard some people thinking it could be up to $20 per share. I know a lot of ARBs who thought, hey, you know, good case $10, bad case $5. There were some who were

disappointed with a 99 cent bump. Activision CEO actually got interviewed by David Paper and he said, hey, look, 99% of our shareholder was voted to approve this deal. We're at the one yard line. We wanted to get over. What do you think about the bump or lack of real meaningful bump here? It was disappointing. It underrated the improvement and value of Activision. It underrated how much Activision should have wanted Microsoft to simply close. So if you were to spread the different kind of maximum pain points to the different sides, the bump should have been much bigger. The game theory, though, was that in a all-cash deal, you and I were about to become the likelihood that we would become medium or long-term shareholders

of the people making the decision was going to zero, the likelihood that Satya and others were going to become the bosses of the people who were making the decision on the activism side or many of the top Activision people was about to become 100%. And so I think that there was a massive agency problem where the colleagues were talking to in a situation where it was 55 percent, we're talking with the management and the board as people with a 45 percent chance we're going to be around here in a few months. And the other side is truly a separate entity. Well, at this point, I think the likelihood that they successfully merge within the next 60 days is so high that they're basically all at the side of the table.

There's just a bunch of incredibly, I found them in this process. I'll give you my description. I'm incredibly smart and clearly very highly compensated people talking about this thing we're going to have together that we at the individual level are going to make out like bandits from. And we can't totally screw over these shareholders, but they're going to be people you can forget about come 30 or 60 days from now. So I think the agency problem on the Activision side was severe and disappointing, but really played into how clubby. these two sides are because of the likelihood of success at this point. I'm with you because you've got a board. I mean, look, when you've got a board that thinks a deal is done and they will not be around anymore and a management team that's about to go under, as you said, the buyer, right?

The shareholders voted to approve this deal unless you do something like, there's no recourse, right? They can extend the contract and shareholders have no recourse at this point. If you and I had bought 99% of the shares and we called the board up and said, hey, we are not in favor. We think you need to get a $7 bump and we, anything less than that, we think is terrible. They could have said, hey, go to hell. Like, you know, it really doesn't matter. They, I'm with you. I think tactically, they could have got more. I do understand it is easy for us sitting here to say that. And it's like, hey, are you really going to let a 50 billion plus dollar

deal if you're a management team collapse when like you've got all these employees, you've got all this training? Like, are you going to let it collapse over a dollar or not bump when it's going to close and 30 days. I get it, but I'm with you. I mean, speaking of one of one. One of the things that I do and say both because it's sincere and it's an elicitation technique in terms of research is communicate broadly with senior people on the buyer's side about the individuals on the seller's side who I've had a lot of experiences with leading up to the deal. And I really try to advocate for the people who have been particularly

good. I do that just to do it. I try to compliment people. people who, if they were as bad as they were good, I would have complained about. And in this case, as an elicitation technique, you know, when you do that in a rocky deal, sometimes like, whoa, we don't know if it's going to have. In this case, there were people, I would say, accepting congratulations for this deal having been successful and looking on to the next step. So they are literally thinking about personnel decisions. And those personnel are literally thinking about, like, which office they're going to get. Like, they're kind of moving on from how this affects shareholders and the deal to fully expecting this to close. And Satya, I have to say, even before trial was sounding

either delusional or justifiably confident. And, you know, he's a careful guy. He's a smart guy and he's happy to say when he's not sure about something. But he thought this whole thing was going to work. And it seems to be justified at this point. So let me go to a different end of one. Sure. I think the most interesting thing that happened in kind of event markets this month is the simo max linear deal now i've done i did a podcast on this with my friend mordecai back in december i think it was december people can go listen to that podcast if they want a little background i think mordecai and i are going to do another like focus podcast on it in the next week or two because it is a really interesting situation but it is right up yours in eyes alley so i i want to

talk about it now i'll let you give some thoughts simo max lear had been in a deal for probably 18 months now to get acquired simo you know the the deal consideration was over a hundred dollars per share, most of it in cash, Simo stock was trading around $50 per share coming into the month. So that tells you, hey, the market was very skeptical that they were going to get approval. A week or two ago, the one hold up here is the Chinese SAMR has not approved the deal. A week or two ago, Chinese SMR out of nowhere comes out and says, hey, we're approving the deal. You're good to go. Simo stock pops from $50 per share to $90 per share as people say, oh, my God, this deal's

going to close. That very day, Max Lear comes out in the afternoon and files in 8K and says, oh, actually, Simo, we think you've had a material adverse effect. We're breaking the merger because you had a material adverse effect. We're not going to pay the merger termination. And Simo stock goes from $90 per share to today, it's kind of at $60 per share. Simo has come out and said, we don't think there's an MAE. We think the contracts still on and we're going to sue to keep it on, basically. And now that kind of brings us up to today. The reason I say it's in our wheelhouse is because anybody who, when we hear M.A, you and I say, oh, Twitter, this is great. I want to turn it over to you there. So, you know, that's kind of the overview. What do you think is going on with Simon and Aslanair?

That was a wild day. I was neither a hero nor villain that day. I'm sure the heroes, if anybody who kind of got it right in both directions, will mention it. And I'm sure the villains, if you got it wrong in both directions, we'll keep quiet about it. I know people who were long going in it. Samir approval came out and they sold that day. They get a massive return. And I know people who similar approval came out and the stock traded 90, they said, this is over $100 per share. This is done.

Like, we're going to close on a week. And they were very sad when the maximum rate. So I know both sides of it. But so here we go. This deal as cut now has all the regulatory approvals they need. Very much unlike the Microsoft situation where you have this huge mismatch in market. cap, the whole topic of being, the similarity in market caps, I mean, we have very much on

the table the topic of what the buyer can pay. It's not simply agreeing, right? If Microsoft wants to close Activision, the correlation of closing Activision, I think is literally 100% at this point. I don't think they're going to lose. If you know what the CEO of the buyer at once, which I think we all do, I think that that's almost all you need to know. That is not the case here. So I would start by saying there's a brainer in terms of what you're fighting for now financially, right? The deal requires financing. The financing doesn't have that much time before it expires. The buyer in this case has a lot of limitations and constraints around financing around the size of the deal for them. So triangulating what they want is not dispositive of what's

going to happen here. There's a lot of constraints. It's a brainer. I would say that the part of this so far, let me just offer the easiest piece. I have a view that the target has neither violated a material adverse effect, which if you want a way to judge this, hey, Penny, in two seconds, the first thing you glance at is you go to the MAE and you look at the just size of the carve-outs and the specificity in length of the carve-outs, which is the good thing for deal confidence. And it is very, very hard to claim a material adverse effect that doesn't trigger a carve-out in this case.

There's nothing specific, and a lot of the generalities are going to be hard in court to prove. And it appears to me that they have lived up to their duties. So separate from can't be a material-averse effect, and you have to have done the things you're supposed to do for a definitive merger agreement to be in effect. Now, they have access to non-public information that I lack, but based on public information, my view is they've lived up their duties. There hasn't been a material adverse effect. This DMA is in effect now.

Then there's the practical concern of being in effect long enough for the financing to be triggered. From the buyer's side, the fact that I could quibble over whether they cleared the deal in some way that interferes with financing, that's a contractual. point, but the financing disappears, if the money's not there, you can't be forced to do something that's impossible. And so I think that there is a good case here in a very messy situation. So like if you said, even just approximately 100, up, 50 down, and we can use different things. Like, if you're talking about like 70, 80, 90, like I have no confidence that equates to that. But between 50 and $60 where you say, hey, a messy, weird, zany situation that maybe nobody expected to be in exactly this one. It's very interesting to me because maybe that

something gets put together, either this deal or you have enough influence with a strong legal case to go to the buyer and say, hey, let's work together and splitting the difference, you know, changing something from more cash to more equity. Can we scramble together by the time the financing is up? Can we threaten the, can we work together to threaten the banks, say, yeah, we're going to close, give me the financing, and then use that leverage to say, let's have a kind of comprehensive split the difference with everybody, kind of rational outcome between them. So I think the legal case in Delaware is good. I think the dynamics are complicated and there's a lot of ways to put something together that makes sense for everybody. Dynamics favor

putting something back together here. I'm sorry to the listeners for the recording troubles, But no, everything you were saying, I completely agree, you know, to me, if you look, when Max Lanier and Simo announced this deal, they were valuing Simo at $4 billion, the combined market caps of the companies right now, the combined enterprise value is about $4 billion. dollars. Simos shareholders were going to get $3.1 billion of cash. Max linear's enterprise value is under $2.5 billion. So you start looking at that and you say like, look, Wells Fargo, I heard Wells Fargo was the loan provider. I heard they were probably going to take a billion dollar bath on a $3 billion loan. You know, like you look at that and you say from the buyer side, yeah, you'd love to get out of that deal. So when Chinese regulatory said, this is approved, everyone's probably crying in that room. It does remind me a lot of Twitter in that way where you have a buyer

who they have buyers remorse, they really want to get out of this deal, they're hoping regulatory bails them out. And in this case, it didn't. So they sue and claim MAA. As you said, we only have public information, not non-public, but it seems like it's really going to be tough. Where this becomes an end of when, and hopefully we can talk about this. Hopefully my internet sustains this is, this is not Delaware company. Material adverse effect, the merger contract specifically says an MAE will be defined by Delaware, but everything else is Singapore. And the reason it's so interesting to me is I talked to a lot of ARBs the day this broke and I did not talk to a single ARB who was like Singapore, Singapore contract law. I'm really ready to go. I'm really

brushed up on that. I'm really ready to say how this is going to go. So that's why it's so interesting to me. What have you learned so far and how are you thinking like this Singapore process is going to play out? I'm going to be smarter on this next time we speak. I actually had double booked with a really top lawyer on this topic for this podcast. And so that's my project for this afternoon. So I'm still at the Delaware issues look good and TBD on the Singapore aspect of this, which is the big one, right? That's the one where it'll be very, very hard based on what I know now to run this

through to the end, but it looks cheap enough here that we can have a noisy, chaotic position in our portfolio, we're long ago. If I can ramble and please tell me if you agree to agree with anything, where I've come out on it so far, and again, people should remember, I was in Europe last week. Like, yeah, I was trying to work, but it was very hard. So I'm with you. Hopefully next month we'll know more. But where I've come out so far is this will be in Singapore.

I believe it's Singapore arbitration, which I think is a three judge panel is the arbitration. Could be wrong on all that. We'll know more next week. Where I've come out is I think Simo has a very good case. But if you want to own the stock here, I think you have to have some sort of fundamental view because, you know, I think the case takes a really long time. I believe arbitration takes at best 18 months. So you're looking at a really long time frame. And again, Max Lanier, if they lose this case, there's a chance because the financing will have broke.

There's a chance they're filing and Simo is becoming a huge unsecured creditor of Max linear, right? So I think to have at least some type of view, not that you think, you know, Simon's trading at 60. You think fundamentally it's worth 100, but you can't think Simon's trading at 16 and it's worth 20. You have to have some sort of view. And then I kind of think the most likely scenario here is you do a massive, everybody sits down in an arbitration table and you do a massive recut of the deal where, you know, Simon was going to get $90 per share in cash and, or $98, I think it was, and some equity. You change it. So Simo is basically buying Max Lanier on the cheap, maybe getting to, I think that's how it plays out. But it's very, it's very tough to know.

But look, again, if it's an end of one situation, this is the maybe the most unique merger situation we've ever seen, MAA claims. Singapore court, Delaware, M.E. You've got to at least pay attention because N of ones tend to be where Alpha can hide for people who are willing to do the work. That's my opinion. Please tell me if I'm wrong, agreed anything. No, that's right. If you start at the end and work back, it'll be Simo gets some amount of value that is, you know, call it 75 bucks, 80 bucks of largely equity max linear. They get as much financing as they can for cash. And then the rest is equity. no bankruptcy and expedited as much as possible, you know, just say, hey, the more reasonable everybody wants to be, the more people want to split the difference, the faster we can be in the

less of the negative externalities of a lengthy process. I'm winging it still on Singapore, but it is one of my favorite countries in the world. It tends to have one of the most rational sets of both public policy generally and the court system is, I think it's sensationally good. I have long admired the country and found a huge well of kind of reasonableness and rationality, if harshness, right? It's kind of a benign despotism in some ways, but heavy on the benign, you know. And so I have a subjective sense that when we have a subjective sense that when we have a serious conclusion. And I think tomorrow I'll know a lot more than today. It'll be one that says,

oh, no, this is something we can underwrite in terms of their handling the situation. Let me flip to. Look, I think we'll be talking more about CMO next month. Assuming that it's not subtle or something, I'm completely with you. Look, we're, we do a July set of the months, it's July 31st. This is the most unique situation we've seen in the markets a long time. So I'm completely with you. I want to hopefully do a lot more and talk more about this next month. Let me just quickly tick. over to, we got lots of questions online. I unfortunately can't address all of them, but there is several people asked about

Liquidia, which I did a podcast with Lionel Hutz on. It might be time to have them on again because the stock's been volatile, even though we haven't got crazy amounts of news there. We just, but just wanted to toss it over to you. Liquidia, any new or interesting thoughts there? With the difficulties in merger arb on the regulatory front and deal financing front, I've just thrown myself into a number of litigation situations that I really just think are better than a lot of the ARB opportunities. Really, I mean, ATVI is kind of one-off, but I don't have a

diversified basket of merger ARBs that I love. I kind of like waiting until the government sues them at this point because they're bringing so many Zanyi cases. Liquidity is, liquidity is towards the top of the legal cases that I like. Lionel Hutz has just been terrific on this. He's been kind of the acts on the name. But I love it. There is, there were a number of routes to getting to the market. It's a huge market. The market caps half a billion dollars and they could be the better product in a multi-billion dollar market. They need to get to market. United Therapeutics has just put up every conceivable, I mean, legal delay possible. And, you know, with the stock under eight bucks, you know, it could be a, I don't know, it's very hard to value

the upside here, but double or triple within a year, if they can get this thing to the market. The company has always been cautious about timeline. Like they have very overtly said this would be 2024. I think that's right. And I think my confidence is extremely high. That's right. Both me and the market got a little hot and bothered over the prospect that, oh, maybe it's better than anything they're saying or expecting, maybe some of the legal possibilities that were,

when we bought this, like 5% chance, 2% chance, very unlikely, it looked like, oh, maybe there's other ways they could get around it. Those aren't going to happen, right? There's no, like, I don't think we're going to get a lot of finality here this year, but, you know, we're going into something that they could get to the market next year, and this could be fantastically valuable. So, yeah, I know, I think it's a good situation, and we've kind of gotten past the last, I mean, ironically, potential upside, the potential upside that is at least somewhat baked into the market. So you get hit on days that they don't win fast. No, I completely agree. You know, to me, I've always, I think this came out in the podcast

I did with Lionel, but it's, I've, I've loved the case. I just, I've always loved the case. I am disappointed that the judge didn't rule in their favor because that would have been great. The question is really just one of upside. And I know people who think this multi, multi-bagger potential, huge market, superior products, you know, it's really just one of, I think they're 95% to win the PTAB case. You know, they just have to have the PTAB rule in affirmed. I think it's 90, 95%. Precedents suggest that's the case.

My reading suggests that smarter than me's case have suggested that. But we've got to get there and then it'll just be a question of what the upside is. Last one, and then we'll kind of call it. Oh, let me throw out one little. There's some circumstantial evidence over the last month or two that the company thinks they're going to win and need to be prepped for in terms of hiring and so forth. Like they're very much getting ready to get to market. I mean, the company, not that it's worthless if this, if this doesn't, if they don't win,

but it's, you know, it's approaching that. Like, what are they going to do to say, hey, we think we have a bad case and if we're not going to hire and then be. in a place where if they win, they're completely unprepared. You know, it is kind of one of those, you have to hire no matter what, but I agree with you. It seems like they're very confident on it. And now, a quick word from our sponsor. Are traditional expert calls in the investment world becoming obsolete?

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head over to their website at streamrrg.com to learn more. Thanks for listening and we'll catch you next time. Let me turn real quickly, Burford. I know that's been a big area of interest. Again, I've done my friend Arden Foken has come in the podcast three times to talk about Burford, but they had their long-awaited trial against Argentina was last week, three-day trial. I think, again, I was in Europe, but I think you were paying closer attention to them

me. Burford's already won, right? The judge has already said Burford, you win, Argentina owes you guys' payments for YPF. The question is now the quantum of payments and the interest rate of payments. It's a pretty interesting trial. I read a lot of the transcripts and everything, but what did you think about the Burford trial? I try to listen to everything and boy, was this one to read the transcript for, it was combining incredibly difficult accents with bad microphones. And so I was listening the whole time to people I could barely understand anyways with their mics going in and out. But I think

it was, I think the whole range of options here are somewhere between good to great for us as Burford Longs. I would say that the case the company made or the plaintiff made seems to me to be legally right and that the very good lawyers representing Argentina were kind of throwing up I kind of dust into the gears in ways that I thought didn't look winning. I don't know this judge well enough to say, but like they very much wanted to make a point of how much money we would make if we won and isn't it kind of subjectively too much of a return for Burford, right? They very explicitly said, you know, they bought into it like this.

This is a bunch of, you know, kind of Ringo hedge fund managers and shouldn't they make somewhat less money than they make depending on how this. That's, they definitely said that. They specifically said, I believe at one point, they even said, hey, every dollar you ward Burford is a dollar that can't go to like Argentina pensioners or to build like schools and get water to our children. And they said, Argentina isn't a rich country. And I completely get that, right? I'm not here for pillaging countries, but at the same time, you're going to a judge and saying, hey, forget the law, forget what we, forget everything legal, forget what's right. Just look at this and say, do you want to give rich people money because they legally deserve it or should you let us?

we promise like yes we've got a history of looting and pillaging and taking money but we promise we're going to use it this time it was a very strange argument I am here for pillaging countries that nationalized property that's not theirs where there was an explicit contractual way for compensating the owners I'm with you though I if I can just go on a quick time every now and then I'll see like a politician running and then somebody will take a clip from something you said on a podcast like six years ago and share the clip and they'll be like this man And every time I see that, be like, man, if Chris and I ever run for office, they're going to be able to pull something out of here and they'll be like, I'm sure at one point you and I were like joking and said pro cancer. And they're going to be like, these two are pro cancer. You can't vote for these people. And then they'll have the great clip of Chris. I am for pillaging and looting. It's going to be so bad. So bad. But Argentina is such an interesting country. It breaks investors hearts every, I mean, the number of times that they've screwed over equity holders, even more so credit holder. I mean, it's just, it's, it's, it's, it's, it's, it's, it's amazing. They always seem like they're on the cusp of rule of law, law and order, first world, due process. I mean, they always seem like they're almost there. And then they just, it's a rug pull every few years. They do seem like they're on the up and up, uh, in terms of trying to be more shareholder friendly, uh, more investor friendly. I mean, they need, uh, for an investment to thrive as much as they'd like to. But it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's, it's

It's always, it's an endlessly enticing country to invest in and it's been repeated, a heartache. But, and then there's this problem of who settles with us versus kicks the can down the road for their successors, right? So that's always an interesting one looking at the game theory here. But in any event, I thought the case went well. I struggled to follow a lot of the minutia on it just because it was a hard recording. But, yeah, I think we'll, it'll be good or great and probably great. Agreed. And, you know, that's a, people can.

refer to the podcast. I think once we have a ruling, Artem's probably going to come back on and we'll update it. But it's a really interesting one because yeah, look, the stocks run a lot since they got the Argentina ruling. But it that core business, you know, I do think the YPF case has proved out a lot about the core business and it's kind of VC potential returns. And if you look at the returns on capital and how the, you know, there's a huge rest of the book there. You could argue today's share price values the Argentina case at nothing. And they are, it seems they're going to win a lot of money there. There's the, the question of collectibility and all that that still remains there. But I promise you, if you're Burford's management and you're running a two or three billion dollar company and you've got a potential $5 billion legal claim and you've got a whole division that does asset recovery, I promise you, they've been thinking about how to recover and they've probably got a pretty good idea, a little bit better than you and I, but really interesting. Chris, I know you have an 11 o'clock.

I'm sorry to everyone for the technical issues. I think they were all on my end. Anything you want to leave us with before we wrap this up? I have nothing to have. great well look i'm looking forward to i'll talk to you before them but i'm looking forward to our august state of the markets again apologize to everyone for the technical difficulties but we will talk to everyone then very good thanks andrew a quick disclaimer nothing on this podcast should be considered an investment advice guests or the hosts may have positions in any of the stocks

mentioned during this podcast please do your own work and consult a financial advisor thanks