Listed litigation funder Manolete Partners has come out fighting following an online report that it was ‘burning cash at a rate of knots’.
The company was the subject of an eviscerating article by a group called ShareProphets last Friday that alleged it was in financial trouble and needed to urgently raise more cash.
The allegations came just a week after Manolete reported healthy results for the year ending 31 March 2020. The row has echoes of that involving another listed litigation funder, Burford Capital.
Manolete shares have lost around a fifth of their value since last week, but recovered slightly today following a statement issued to the London Stock Exchange.
The response stated it was untrue to suggest that the company was ‘burning cash’ and said the article contained false and misleading allegations.
Manolete said that cash generated from completed cases in 2019/20 has exceeded all expenses on closed cases and all company cash overheads. It conceded that costs underwent a ‘step-change’ 48% increase to £4m, covered by the cost of floating and the establishment of an in-house regional network of solicitors. That network is now fully established, with 152 live cases by the end of March.
The company said there was ‘no basis’ for the suggestion it would need to issue new capital. Shortly before the year end, as Covid-19 impacted the country, ‘purely as a liquidity precaution’ Manolete drew down £8m of its £20m revolving credit facility with HSBC.
The response added: ‘The board is confident that the company’s existing £20m RCF will be more than adequate to finance the business in the foreseeable future.’
It rejected allegations that settlements were ‘drawn out affairs’, as suggested in the article: the company said it had an ‘excellent track record’ of collecting on payment plans agreed with debtors.
Manolete shares were trading today at 415p, 5% up on yesterday. They stood at 515p before the ShareProphets article appeared.