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  "documentTitle": "Burford Capital (BUR)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson Block",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2020-05-12 00:00:00",
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  "notes": "This is a research note page from a short-seller report (Muddy Waters Research).",
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      "text": "After adjusting for our estimate of aggressively booked segment income, we find that Burford's combined 2019 operating profit is overstated by approximately 8.0%.",
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      "text": "operating profit: 8.0%",
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      "text": "Burford reported a 16% ROIC on complex strategies in 2018, excluding fees and carry. As of the 2019 annual report, however, Burford's ROIC on the nearly analogous capital provision – indirect investments had shrunk to just 8%, excluding fees.",
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      "text": "Accordingly, we believe that the $20.6 million of unattributable Indirect income comes from fair value gains, including gains taken on hedges. After adjusting for our estimate of aggressively booked segment income, we find that Burford's combined 2019 operating profit is overstated by approximately 8.0%:",
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      "text": "In fact, in one instance more than a month after the end of the financial year, and after reporting preliminary results on February 3, 2020, Burford reclassified Case 170718, an $11.9 million complex strategies investment with $11.9 million of recoveries, into Direct.",
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      "kind": "paragraph",
      "text": "As much as Burford may try to muddle its year-on-year reporting, it is necessary to understand the impact of Burford's methodological changes to establish the degree to which the company may have distorted its 2019 income statement.",
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      "text": "Burford reclassified $34.3 million of complex strategies investments to Direct without substantive explanation. One of these reclassifications of 2019 segment gains or losses occurred well after the end of the fiscal year. This particular reclassification boosted the vintage's recovered proceeds by 13x.",
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      "text": "Page 7 of 10",
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      "text": "Unexplained Capital Provision – Indirect Income Inflates 2019 Profit\n2019 Operating Profit, As Stated* 279.3\nLess Unexplained Income (20.6)\n2019 Operating Profit, As Adjusted 258.7\nDegree of BUR Overstatement 8.0%",
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      "kind": "title",
      "text": "Exaggerating 2019 Vintage Recoveries by Moving Assets",
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