Reports
Litigation Finance House Hits Back After Hedge Fund Crushes Shares

A player in the field of litigation investment - seen as a sort of alternative asset class - has crashed in the UK stock market. A hedge fund has attacked its financial reporting practices. The firm, Burford, says the claims are groundless.
Litigation finance business Burford Capital has
hit back at US hedge fund Muddy Waters after the latter issued a
“short attack report” and pushed down the business’s shares by as
much as 19 per cent on Tuesday. Shares continued to slump
yesterday.
Burford said that Muddy Waters’ description of its business as a
“poor business masquerading as a great one” were “without
merit”.
Shares in Burford, quoted on London’s AIM market, were down by
about 49 per cent yesterday, trading at 576 pence per
share.
Source: Hargreaves Lansdown
“Burford will issue a detailed response to the report as soon as
practicable and, following that detailed response, will also
convene an investor conference call, as to which participation
details will be provided in due course,” Burford said in a
statement yesterday. Christopher Bogart and Jonathan Molot,
Burford’s chief executive and chief investment officer,
respectively, said that once the firm has made its detailed
response to the criticisms, they will buy Burford shares for
their own accounts.
The hedge fund’s report had criticised the accounting Burford
uses to value its litigation cases, which it says it is
“aggressively marking”. It claimed that Burford is “actively
misleading investors” further with some of the metrics that it
reports.
Responding, Burford said that it used International Financial
Reporting Standards which were widely used throughout the
financial sector.
WealthBriefing has written about Burford
recently; the firm is one of a crop of specialists that make
money by
investing in litigation cases, a sector that arguably falls
into the category of alternative investments.
Bear raid
“In addition to our audited IFRS reporting, Burford provides
cash-based investment reporting in extraordinary detail,
including providing line-by-line investment detail about every
litigation finance investment we have ever made. We just put the
latest instalment of that reporting on our website yesterday. We
are transparent about how we analyse and report on that data; our
approach has been consistent for many years,” Burford said in its
statement.
“Burford believes that yesterday’s share price movement relates
to a rumour of a potential `short attack’ or `bear raid’, a
tactic where short sellers take on a short position in a
company’s stock and then engage in claims about the company in an
effort to alarm investors, depress a company’s stock and profit
from the decline. Burford also believes that some of its prior
recent share price volatility is related to such activity,” it
continued.
The firm said there is a “clear line” between appropriate
commentary and market manipulation. It said it is “investigating,
with the assistance of market experts and experienced outside
litigation counsel, the market activities here and will take
appropriate legal action should we discover actionable
misconduct. We are strongly suspicious that yesterday’s
significant fall in the share price was based on such actionable
misconduct,” it said.