Chris DeMuth's State of the Markets July 2023 (podcast #183)
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.
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Transcript begins below
Andrew Walker: Hello and welcome to the Yet Another Value podcast. I'm your host, Andrew Walker. If you like, this podcast 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 Rangeley Capital's founder for his monthly state of the markets. Chris DeMuth. Chris, how's it going?
Chris: Going well, Andrew, welcome home, and nice to see you.
Andrew: 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 laughs at me every time I do it. Chris, we've got a lot to talk about. Before we get there, quick disclaimer and 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 consult a financial advisor this isn't financial advice. Anyway, Chris, 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 Emmy, Claiment, and Simon, like all these things were happening and I was just like, I just need to know what's going on, I need to read, I need to research. But what is on your mind for the month of July?
Chris: 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 of 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 time zone or flight delayed enough to think about it afterwards. Cmos [?] one of 'em. There were a couple of others in that category. 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 endlessly interested in the antitrust there in the US 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 activation. I know we've spoken about it quite a few times.
Andrew: Not because we speak so much speak in emails, so much offline. But if I remember correctly the judge's ruling saying no PJI for Activision came after our last podcast. So our last podcast was in this weird state where he said, "Hey, is the judge going to basically block this DR or allow it? You were saying, if I remember correctly, you were listening to it at... 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 going to block this deal with the smoking guns." They revealed how good their lawyers and their executives are doing. So since then, the judge has come out and said no PJI, the deal, it hit the walk date. I want to talk about the walk date for a second because it was interesting. But the deal 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's going to close.
Chris: Yeah, so actually the only part that I wasn't live was when we recorded, we kind of duped it and I had to go back for that one hour. But the judges' 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. They failed redundantly. There were a number of points that were necessary but insufficient for the government to make, and they didn't accomplish anything.
For the precedent value of this, it's going to embolden everybody who Microsoft can afford litigation. 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 processes, the punishment, the difficulty of litigating but if you're big enough to litigate away Microsoft should feel great about their case, about the decision, not just, "Yay, we won. Yay, make some money good for us." But a catharsis of living in a 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 at the same time, I listened to all of the CMA, the CMA has been a very difficult process historically to appeal.
Andrew: From the beginning, you and I were saying on this podcast, we think the US 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.
Chris: We'd love it. Yeah.
Andrew: Our one concern was, "Hey if the CMA blocks, we don't know how you get around a CMA block. And the CMA if I remember correctly, end of April, did block the deal and there were rumors that they were going to and when that happened I said, 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.
Chris: So I listened to every word of what we would call the appellate court the tribunal and 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 ultra marathon. I was recovering in Lucen 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 and decide tomorrow."
I don't know what else there is to think about. Assuming you've spent 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, well expedite this decision, we'll make it two years from now." I'm like, "What? 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 in 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 do lose seed your 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 that wants to say, "Fine, the bankers that want that finance." There's no substantive...
Andrew: It was so weird because Microsoft would say, "Hey, judge, we'd really like you to dismiss the trial next week." And then 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." And Activision I suppose the seller would say, "Yes, we'd really like to get this deal done." And the judge said, "Whoa, whoa, whoa. Everyone here wants to delay, but I need to make sure why 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 says, "Let's, let's hold it up a second.
Chris: It is just so foreign to what we do. 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. Now that we all agree, like, "Well, now you do it." And so that was, I thought, funny. But then it got to the point, and then the high comedy. 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. They just had to admit any kind of, "Oh, no, this part of the thing we did was wrong." The tribunal guy was handing everybody, "Here's how we get around it we could do it instantly." He was just guided.
He knew there was absolutely no benefit to any delay other than they needed the precedent value of handling this the right way, fine but it was just comedic in that you had these bureaucrats that the one thing they wouldn't do is take back the thing they already said, even though they said the thing I already said, which was like, decided in 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."
Andrew: 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 [inaudible] there was this really interesting day, I think it was July 18th, that was the day the merger agreement was going to expire, right? 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 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 it, you could have a bump you could not have a bump.
It was just this really strange day. I've talked about it 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, 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 of this deal and all that 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, good case, $10, bad case, $5." There were some ARBs who were disappointed with the 99-cent bump. Activision's CEO actually got interviewed by David Paper and he said, "Hey, look, 99% of our shareholders 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?
Chris: It was disappointing. It underrated the improvement in the value of Activision. It underrated how much Activision should have wanted Microsoft to simply close. So if you were to spread the different kinds of maximum pain points to the different sides, the bumps should have been much bigger. The game theory though, was that in an 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 decisions 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%.
We're talking with the management and the board as people with a 45% 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 same side of the table. There's just a bunch of incredibly, I found them in this process, I'll give you my description of an 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. 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.
Andrew: I'm with you because you've got a board. 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 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 think you need to get a $7 bump, and anything less than that we think is terrible." They could have said, "Hey, go to hell." It really doesn't matter. I'm with you. I think tactically they could have gotten 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 you've got all these employees, you've got all this training. Are you going to let it collapse over a dollar or not bump when it's going to close in 30 days? I get it, but I'm with you. Speaking of one, oh, go ahead.
Chris: 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 do try to advocate for the people who have been particularly good. I do that just to do it. I try to compliment people who, if they were as bad as they were good, I would've complained about. And in this case as elicitation technique when you do that in a rocky deal, sometimes you're like, "Whoa, we don't know if it's going to get done." In this case, there were people, I would say accepting congratulations for this deal having been successful and looking onto the next step.
So they are literally thinking about personnel decisions. And those personnel are literally thinking about which office they're going to get. 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. He's a careful guy. He's a smart guy, and he's happy to say when he is not sure about something, but he thought this whole thing was going to work, and it seems to be justified at this point.
Andrew: So let me go to a different end of line.
Chris: Sure.
Andrew: I think the most interesting thing that happened in kind of event markets this month is the Simo [?] MaxLanier deal. Now, 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 focus podcast on it in the next week or two because it is a really interesting situation, but it is right up your size alley. So I want to talk about it now. All the way the background, I'll let you give some thoughts. Simo and MaxLanier have been in a deal for probably 18 months now to get acquired. The deal consideration was over $100 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 holdup here is the Chinese SAMR has not approved the deal. A week or two ago, Chinese SAMR 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, MaxLanier comes out in the afternoon and files an 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 contract's 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 when we hear MAE, you and I say, "Oh, Twitter, this is great, I want to turn it over to you there." So, that's kind of the overview. What do you think is going on with Simo and MaxLanier?
Chris: That was a wild day. I was neither a hero nor a 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, will keep quiet about it.
Andrew: I know people who were long going in it Samir's approval came out and they sold that day and they had a massive return. And I know people who Samir approval came out and the stock trading $90, they said, "This is over $100 per share. This is done, we're going to close in a week." And they were very sad when the [inaudible]. So I know both sides of it.
Chris: 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 similarity market caps, I mean, we are very much on the table on the topic of what the buyer can pay, right? It's not simply agreeing, right? If Microsoft wants to close Activision, the correlation of closing Activision, I think is literally a 100% at this point. I don't think they're going to lose the if you know what the CEO of the buyer wants, 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 might want to buy them. Okay.
Andrew: Hey guys, it looked like my internet cut out there. Pause it. I think we'll be able to edit it successfully, but Chris was just saying if Microsoft wants to close on Activision, they will close. And then Chris, I'll just kind of toss it over to you to continue that thought.
Chris: 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 and 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 material adverse 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 to 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 if 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, if you said even just approximately $150 down, you use different things. 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 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 on splitting the difference, changing something from more cash to more equity. Can we scramble together by the time the financing is up? Can we threaten them, 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 a 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.
Andrew, I don't know if I just lost you. I lost the visual. I don't know if you can hear me anymore if I should keep talking or stop here at this point. Andrew might be back. Hopefully, I'll just keep going here and...
Andrew: I don't know what's happening, Chris. I think my internet's going crazy. Can you hear me now?
Chris: Okay, I just lost the visual and then you're back there. Okay. So I don't know if you caught any of that, but I was just saying dynamics favor putting something back together here.
Andrew: I'm sorry to the listeners for the recording troubles, but no, everything you're saying, I completely agree. To me, if you look when MaxLanier 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. Simo shareholders were going to get $3.1 billion of cash. MaxLanier's enterprise value is under two and a half billion. So you start looking at that and you say... look, I heard Wells Fargo was the loan provider. I heard they were probably going to take a billion-dollar bath on a three-billion loan. You look at that and you say, from the buyer side, "Yeah, you'd love to get out of that deal." 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 buyer's 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 MAE. As you said, we only have non-public information, 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. This is not Delaware company material adverse effect. The merger contract specifically says, and 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 Singapore Singapore contract law. I'm really ready to go. I'm really brushed up on that. I'm really ready to see 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?
Chris: 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 the Delaware issues look good, and TBD on the Singapore aspect of this, which is the big one, right? And 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 for long enough.
Andrew: If I can ramble and please tell me if you agree, or disagree with anything. Where I've come out on it so far. And again, people should remember I was in Europe last week, 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 in the arbitration. Could be wrong on all that. We will 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 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 timeframe. And again, MaxLanier, if they lose this case there's a chance because the financing will have broke. There's a chance they're filing, and Simo's becoming a huge unsecured creditor of MaxLanier, right? So I think you have to have at least some type of view, not that you think, Simo's trading at $60 and you think fundamentally it's worth $100, but you can't think Simo's trading at $60 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 everybody sits down at an arbitration table and you do a massive recut of the deal where Simo was going to get $90 per share in cash or $98 I think it was, and some equity, you change it so Simo's basically buying MaxLanier on the cheap, maybe getting to... I think that's how it plays out. But it's very tough to know. But again, if it's [inaudible] situation, this is maybe the most unique merger situation we've ever seen. MAE claims, Singapore Court, Delaware MAE, 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, or agree with anything.
Chris: No, that's right. If you start at the end and work back, it'll be Simo gets some amount of value that is, call it $75, $80 of largely equity MaxLinear, they get as much financing as they can for cash. And then the rest is equity. No bankruptcy and expedited as much as possible. Just say, "Hey, the more reasonable everybody wants to be, the more people want to split the difference, the faster we can be, and 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. So I 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."
Andrew: Look, I think we'll be talking more about SEMA next month assuming that it's not settled or something. I'm completely with you. Look, we do a July set of the month. It's July 31st. This is the most unique situation we've seen in the markets in 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 several people asked about Liquidia, which I did a podcast with Lionel Huts on. It might be time to have him on again because the stock's been volatile, even though we haven't got crazy amounts of news there. But I just wanted to toss it over to you, Liquidia, any new or interesting thoughts there?
Chris: With the difficulties in a 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 ARBs opportunities really with 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 ZA [?] cases. Liquidity is towards the top of the legal cases that I like. Lionel Huts has just been terrific on this. He's been kind of the AX on the name. But I love it. 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 legal delay possible. And
with the stock under $8 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. 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 when we bought this 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? I don't think we're going to get a lot of finality here this year, but we're going into something that they could get to the market next year and this could be fantastically valuable. So I think it's a good situation and we've kind of gotten past the last, I mean, ironically the potential upside that is at least somewhat baked into the market, so you get hit on days that they don't win fast.
Andrew: No, I completely agree. To me, I think this came out in the podcast I did with Lionel, but I loved the case. I've always loved the case. I am disappointed that the judge didn't rule in their favor because that would've been great. The question is really just one of upside. And I know people who think this multi-bagger potential, huge market is a pure product, it's really just one of, I think they're 95% to win the PTAB case. They just have to have the PTAB ruling affirmed. I think it's 90%, 95% precedent suggests that's the case. My reading suggests that smarter people than ME'S case have suggested that. But we've got to get there and that'll just be a question of what the upside is. Last one, and then we will kind of call...
Chris: 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. They're very much getting ready to get to market if they get this case.
Andrew: The company, not that it's worthless if they don't win, but it's approaching that. 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, 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. Let me turn real quickly, Burford, I know that's been a big area of interest. Again, my friend [inaudible] has come to the podcast three times to talk about Burford, but they had the long-awaited trial against Argentina was last week, a three-day trial, I think. Again, I was in Europe, but I think you were paying closer attention to the [inaudible] the Burford has 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 was a pretty interesting trial. I read a lot of the transcripts and everything, but what did you think about the Burford trial?
Chris: 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 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 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 explicitly said they bought into it like this, this is a bunch of kind of Ringo hedge fund managers, and shouldn't they make somewhat less money than they make de depending on how this...
Andrew: They definitely said that. I mean, they specifically said, I believe at one point they even said, "Hey, every dollar you award 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 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? 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 to me.
Chris: I am here for pillaging countries that nationalized property that's not theirs, where there was an explicit contractual way for compensating the owners.
Andrew: I'm with you though if I can just go in a quick test, every now and then I'll see a politician running and then somebody will take a clip from something you said on a podcast like six years ago and show the clip and they'll be like, "This man." And every time I see that, I'll be like, "Man, if Chris and I ever run for office, they're going to be able to pull something out of here." I'm sure at one point you and I were 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.
Chris: Yeah, Argentina is such an interesting country. It breaks investors' hearts. The number of times that they've screwed over equity holders even more so credit holders it's amazing. They always seem like they're on the cusp of rule of law and order first world due process. They always seem like they're almost there and then it's a rug pull every few years. They do seem like they're on the up and up in terms of trying to be more shareholder-friendly, more investor friendly. They need foreign investment to thrive as much as they'd like to, but it's always endlessly enticing a country to invest in and it's been repeated a heartache. 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 the event, I thought the case went well. I struggled to follow a lot of the minutiae on it, just because it was a hard recording. But yeah, no, I think it'll be good or great, and probably great.
Andrew: Agreed. And people can refer to the podcast. I think once we have a ruling art'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 if that core business I do think the YPF case has proved out a lot about the core business, and its kind of VC potential returns. And if you look at the returns on capital and there's a huge rest of the book there. You could argue today's share price values the Argentina case at nothing. And it seems they're going to win a lot of money there. There's the question of collectibility and all that, that still remains there. But I promise you if you're Bedford's management and you're running a two or $3 billion 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 interestingly. Chris, I know you have an 11 o'clock call.
Chris: I have a hard stop.
Andrew: 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?
Chris: I have nothing to add.
Andrew: Great. Well, look, I'll talk to you before then, 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.
Chris: Very good. Thanks, Andrew.
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