Litigation Capital reports adverse outcome in commercial arbitration case

(Sharecast News) - Litigation Capital Management reported an adverse outcome in a commercial arbitration case funded alongside its first managed fund on Tuesday, resulting in a write-down of a significant fair value asset from its balance sheet. The AIM-traded firm said the case, heard before the London Court of International Arbitration, concluded with the tribunal ruling against the claimant supported by LCM.

LCM said it had invested £2.5m of its own capital into the case, with a further £7.5m contributed by Fund I.

As of 31 December, the case had been recorded at a fair value of £17m, inclusive of expected performance fees.

The valuation was supported by advice from independent King's Counsel prior to the hearing.

LCM noted that while avenues for appeal were limited, it was assessing possible next steps with the claimant and legal counsel.

Despite the loss, LCM emphasised that it bore no exposure to adverse costs in the matter, and that Fund I's overall performance remained strong, with a net realised internal rate of return of 35% following the outcome.

The firm also reiterated the inherent variability in fair value accounting for litigation assets, which are sensitive to both legal opinion and proximity to resolution, adding that it was continuing to enhance its valuation practices to ensure consistency and discipline.

"While this outcome is disappointing, we remain steadfast in our confidence in the strength of our broader portfolio," said chief executive officer Patrick Moloney.

"Legal finance inherently involves binary outcomes, and while this case did not deliver the expected result, our long-term track record demonstrates our ability to generate strong returns.

"We continue to believe in the substantial value embedded in our portfolio and remain focused on delivering successful outcomes for our investors."

At 1206 GMT, shares in Litigation Capital Management were down 2.12% at 55.99p.

Reporting by Josh White for Sharecast.com.