Burford Capital alleges ‘illegal market manipulation’

Legal financier Burford Capital has alleged that its share price was illegally manipulated around the time of an attack by US short-seller Muddy Waters.

Burford saw its share value nosedive over the past week after Muddy Waters took a short position on the stock, betting that its value would fall, before publishing a damning report on the company’s financial health.

It said a forensic examination of detailed trading data on Tuesday August 6 – when Muddy Waters tweeted about a forthcoming but unidentified short target- and Wednesday August 7 suggested trading was “consistent with material illegal activity”.

Such activity includes methods of driving down share prices known as spoofing and layering, the company said.

Both of these activities are illegal and have resulted in convictions previously, Burford Capital said.

Burford added that data showed there was “an unusual flood of sellside cancellations” beginning shortly before Muddy Waters’ original tweet.

Muddy Waters, which is headed by Carson Block, labelled Burford as a “poor business masquerading as a great one” in a report which sent the company’s shares down by more than 50% on Wednesday.

The following day, Burford hit back against the report, accusing Muddy Waters of peddling “factual inaccuracies” and “fallacious insinuations”.

Christopher Bogart, chief executive of Burford, said the company’s “market-leading” business is the same as it was a week ago.

He said: “What has changed is that a substantial amount of market value was wiped out by activity we believe is consistent with illegal market manipulation that has nothing to do with Burford’s business. That is wrong and that is illegal.”

The fall in value of Burford is also a major blow for crisis-stricken fund manager Neil Woodford, as it is the second-largest holding in his suspended flagship fund.