Times Today13 May 2020 07:18
Muddy Waters steps up Burford attack
Jonathan Ames, Legal Editor
Wednesday May 13 2020, 12.01am, The Times
Investment
Carson Block, founding partner of Muddy Waters Research, which has accused Burford Capital of misleading the market
Carson Block, founding partner of Muddy Waters Research, which has accused Burford Capital of misleading the market
RICK WILKING/REUTERS
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Bosses at a litigation funding business have produced “bull****” figures to mislead the market, a short-seller has claimed in the latest round of an increasingly hostile battle.
Muddy Waters yesterday launched another vicious attack on Burford Capital, which listed on London’s Aim exchange in 2009 and is the biggest company on the junior market.
The US investment firm described Burford’s 2019 financial figures as using “reclassification, redefinition to inflate cash receipts, operating profit, and to otherwise present a misleading picture of the business”.
The report added that “cutting through the new bull****”, it had adjusted Burford’s cash receipts to show a year-on-year decline of minus 11.8 per cent. Muddy Waters also claimed its researchers had readjusted Burford’s reported 2019 operating profit down by approximately 8 per cent.
It said last year “Burford changed its definitions of deployments and realisations by including hedging in them for the first time”.
It went on to say that by removing this “misleading padding” and by using the previous definition, Burford’s balance sheet deployments declined in 2019 by 35.5 per cent instead of the stated 30.6 per cent.
Muddy Waters said its recalculation showed Burford’s realisations fell nearly 23 per cent instead of the 14.2 per cent reported by the company.
A spokeswoman for Burford Capital told The Times yesterday: “We don’t comment on anything that Muddy Waters does.”
Muddy Waters’ earlier attack on Burford last August wiped £1.7 billion off its value. That report claimed Burford had been “egregiously misrepresenting” its return on investments, was “arguably insolvent”, “at high risk of having a liquidity crunch” and had “laughter-inducing” governance.
At the time, Burford responded by saying that the criticisms were “without merit” and the company hit out at short-sellers “of this ilk”, arguing that they were “not long-term investors” but sought to “panic investors into selling their holdings and thereby to drive down the share price”.
Burford’s shares seemed unaffected by the Muddy Waters report — rising 1.3 per cent, or 6½p, to close at 486p.
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